Entity Setup
How to Navigate the One, Big, Beautiful Bill: Planning For Entity Setup And Depreciation Deductions
Entity structuring and capital expenditures changed significantly under the One, Big, Beautiful Bill—understand eligibility, timing, and permanent vs temporary benefits.
By NomadicTax Research Team • 5-8 min read • June 25, 2026
## Understanding Entity Setup & Depreciation under OBBB
The **One, Big, Beautiful Bill (OBBB)** has introduced permanent changes to first-year depreciation treatment for businesses and altered rules for qualifying property—including **sound recording productions**—for assets acquired after January 19, 2025. ([irs.gov](https://www.irs.gov/newsroom/treasury-irs-issue-guidance-on-the-additional-first-year-depreciation-deduction-amended-as-part-of-the-one-big-beautiful-bill?utm_source=openai)) Entities must plan carefully to take full advantage of these changes.
### Key Changes at a Glance
- **100% additional first-year depreciation** is now permanent for qualified depreciable business property, plants (planted/grafted), and sound recording productions acquired after Jan. 19, 2025. ([irs.gov](https://www.irs.gov/newsroom/treasury-irs-issue-guidance-on-the-additional-first-year-depreciation-deduction-amended-as-part-of-the-one-big-beautiful-bill?utm_source=openai))
- There are **elections available** where the deduction can be reduced (e.g., 40% or 60%) depending on property type and when it’s placed in service. ([irs.gov](https://www.irs.gov/newsroom/treasury-irs-issue-guidance-on-the-additional-first-year-depreciation-deduction-amended-as-part-of-the-one-big-beautiful-bill?utm_source=openai))
- Sound recording productions are specifically defined (recording start, release date, etc.) and have special rules under OBBB. ([irs.gov](https://www.irs.gov/newsroom/treasury-irs-issue-guidance-on-the-additional-first-year-depreciation-deduction-amended-as-part-of-the-one-big-beautiful-bill?utm_source=openai))
## What This Means for Different Entity Structures
| Entity Type | Benefit from 100% Depreciation | Things to Watch For |
|---|---|---|
| **Single-Member LLC / Sole Proprietor** | Can deduct full 100% in Year 1 for qualifying property; lower entry cost on investments |
| **Partnerships / S-Corporations** | Same opportunities; may need to make sure partners’ basis and timing align |
| **C Corporations** | Full deduction possible; consider impact of AMT or other corporate rules |
| **Entities Producing Sound Recordings** | Only qualifying sound recording productions commenced in taxable years ending after July 4, 2025 qualify. ([irs.gov](https://www.irs.gov/newsroom/treasury-irs-issue-guidance-on-the-additional-first-year-depreciation-deduction-amended-as-part-of-the-one-big-beautiful-bill?utm_source=openai)) |
## Tactical Planning Tips
- **Time your acquisitions**: If buying or building larger assets (equipment, facility expansions), acquire and place in service before year-end to get full 100% first-year depreciation.
- **Make elections carefully**: For certain property you may elect less than 100% if it leads to better long-term tax results, especially when future depreciation recapture or low income expectations apply.
- **Entity classification matters**: Ensure your entity structure supports favorable depreciation treatment; e.g., self-constructed components or self-built property in partnerships may have specific attribution rules.
- **Recordkeeping is critical**: Track acquisition date, dates of recording/release (for sound production), service-entry dates, and whether property was elected out or partially depreciated.
## Real-Life Example
*Case Study*: Jane owns an LLC producing independent music albums. She starts recording in August 2025 (after the cutoff date under OBBB). She can treat the album project as a **sound recording production**, thus the capital invested in recording, mixing, etc., if the recording is then released, is eligible for first-year 100% depreciation. If she begins work in 2024, or if she owns the rights only after release, different rules may apply.
Meanwhile, John, a small manufacturing business (S corp), buys new machinery in March 2026. Under OBBB, that qualified property (placed in service after Jan. 19, 2025) can get 100%, but John may consider electing only 60% if he's projecting lower income in subsequent years, to preserve depreciation deductions later.
## Action Plan Checklist
- Inventory planned major purchases and assess whether they qualify under OBBB rules.
- Determine for each asset whether to elect full 100% or a reduced rate.
- Consult with your CPA or tax counsel to ensure entity properly structured and ownership basis supports the deductions.
- Maintain detailed support documents: service dates, production/tape dates, contracts.
- Review possible depreciation recapture exposure down the road.
## Final Thoughts
These changes allow many businesses to accelerate deductions and lower current taxable income. For entities considering changes (e.g., reclassification, reorganization), the depreciation framework under OBBB can inform whether shifting entity type or ownership structure makes sense. Proper timing and documentation can make these benefits real—and permanent under the new law.