Entity Setup
Entity Setup & Depreciation Perks: Making the Most of OBBB Provisions
New permanent depreciation rules and changes for qualified sound recordings and production property under the OBBB act unlock opportunities when structuring entities in 2026.
By NomadicTax Research Team • 5-8 min read • June 21, 2026
## OBBB Depreciation Changes at a Glance
The One, Big, Beautiful Bill made major changes to depreciation rules. Key among them:
- **Permanent 100% additional first-year depreciation** for qualified property acquired after **January 19, 2025**. This removes the phasedown structure introduced by the Tax Cuts and Jobs Act. ([irs.gov](https://www.irs.gov/irb/2026-06_IRB?utm_source=openai))
- Sound recording productions are now included as “qualified property” under § 181 and § 168(k). Such productions are treated as acquired upon the start of recording, and placed in service at release or broadcast. ([irs.gov](https://www.irs.gov/irb/2026-06_IRB?utm_source=openai))
- A **special depreciation allowance** for qualified production property (e.g. manufacturing, agriculture) placed in service after July 4, 2025, but before January 1, 2031. ([irs.gov](https://www.irs.gov/newsroom/treasury-irs-issue-guidance-on-special-depreciation-allowance-for-qualified-production-property-announce-upcoming-proposed-regulations-under-the-one-big-beautiful-bill?utm_source=openai))
## Why It Matters for Entity Setup
When forming or re-structuring a business (LLC, S corp, C corp), knowing which assets qualify and when to place them in service can dramatically affect cash flow and taxes:
- Entities investing in sound recording studios or owning IP now have stronger depreciation incentives.
- Entities engaged in production activities—manufacturing or agricultural—can benefit from special allowances.
- Deciding whether to use the 100% deduction or elect a lower percentage (like 40% or 60%) in early years may offer strategic benefits, depending on profitability projections. ([irs.gov](https://www.irs.gov/irb/2026-06_IRB?utm_source=openai))
## Example Scenarios
**a) Audio Production LLC**: If you produce albums or podcasts and commence recording after July 4, 2025, you can treat the production like property qualifying for the 100% bonus depreciation deduction. But you may also elect out if wanting smoother deductions over time.
**b) Manufacturing Startup**: A small manufacturing business opening in mid-2026 could classify qualifying manufacturing equipment as qualified production property—making use of special depreciation allowance. Assets placed in service during that period gain significant upfront tax benefit. Plan purchases accordingly.
## Practical Steps for Entity Owners
- Define what kinds of property your entity will acquire and when. Use contracts and purchase agreements that reflect acquisition vs placed‐in‐service dates.
- Keep records of sound recording production start, release dates; for production property, record usage and activities performed (substantial transformation).
-Consult your tax advisor about which elections to make when filing (some elections have deadlines or irrevocability).
## Final Thoughts
For any entity formed or operating in 2026, the OBBB depreciation changes are among the most powerful tools to accelerate deductions, improve cash flow, and decrease taxes. Pairing entity structure with asset acquisition timing gets you the best results.