Controlled Groups & Multiple Corporations | Fullerton Tax
Travis Tandy
December 2, 2025
🏢 Section 1563 Controlled Groups
Multiple Corporations, One Set of Tax Benefits?
If you’re running more than one corporation from Fullerton or anywhere in Orange County, California, the controlled group rules under Section 1563 can turn multiple entities into a single “taxpayer” for key deductions and credits.
Advanced small business tax
Multi-entity planning
Written by Tandy Consulting Inc.
Article · Controlled Groups & Multiple Corporations
The following article explains how controlled group rules can limit tax benefits for owners of multiple corporations. The core technical content is preserved exactly as written by the author.
If you operate multiple corporations, you might assume each one entitles you to its own set of tax benefits—separate Section 179 limits, additional credits, or even expanded retirement plan flexibility.
Unfortunately, the tax code doesn’t see it that way. Hidden within IRC Section 1563 are rules that can quietly collapse your corporations into a single “controlled group,” dramatically limiting the deductions and credits you thought you were multiplying.
Here’s what you need to know.
The Hidden “One Taxpayer” Rule
Under Section 1563, the IRS evaluates who owns and controls your corporations. If the ownership structure meets certain thresholds—either directly or through attribution among family members, entities, or even stock options—the IRS treats all related corporations as one economic unit. This combined unit, known as a “controlled group,” receives only one set of key tax benefits, no matter how many corporations exist on paper.
This can reduce or eliminate tax advantages you expected. For example, businesses within a controlled group must share one Section 179 deduction limit, one accumulated earnings credit, and one pool of R&D tax credits. Employee benefit plans must meet coverage rules across the entire group. And while each corporation still files its own return, the controlled group must coordinate to allocate benefits properly—otherwise, the IRS will make the allocation for you.
How Controlled Groups Are Triggered
Controlled group status is based purely on ownership, not on business operations. The rules generally fall into three categories:
Parent-subsidiary groups, where one corporation owns at least 80 percent of another
Brother-sister groups, where five or fewer common owners control multiple corporations and share more than 50 percent identical ownership
Combined groups, which blend the two
Complicating matters further, attribution rules may treat you as owning stock held by your spouse, children, parents, certain trusts, or entities you own—sometimes pulling corporations together unexpectedly.
What You Can Do
The good news: with advance planning, you can often avoid or unwind a controlled group legally and safely. Strategies may include adjusting ownership percentages, adding new owners, restructuring voting rights, or using non-corporate entities such as LLCs for new ventures. And if a controlled group is unavoidable, proactive allocation of deductions ensures you—not the IRS—decide where your tax benefits go.
⚠️ Key impacts on your tax strategy
Only one Section 179 limit for the entire controlled group.
Shared R&D credits and accumulated earnings credit.
Employee benefit rules tested across all related corporations.
Potential surprises if family attribution rules apply.
📌 Why this matters in Fullerton & Orange County
Common for local owners to have separate corporations for different ventures or practices.
Real estate, professional services, and family businesses may be pulled into one group.
Local planning can coordinate entity choices, ownership shifts, and retirement plans.
Helps avoid overestimating deductions when budgeting for upcoming tax years.
Next step
If you own or are planning multiple corporations in Fullerton or elsewhere in Orange County, reviewing your structure under the controlled group rules can prevent surprises. Coordinated planning lets you align ownership, entity choice, and benefit allocations with your long-term goals.
Who should read this?
Ideal readers in Fullerton & OC
Owners with two or more corporations or professional practices.
Shareholders using separate entities for real estate and operations.
Family businesses splitting activities among multiple entities.
Growing companies planning to form additional corporations.
In Fullerton and across Orange County, multi-entity structures are common for doctors, therapists, consultants, and other small business owners. Controlled group rules may tie those corporations together for key tax limits.
Planning prompts
Questions to ask before year-end
Do common owners collectively meet the 80% or 50% thresholds?
Are family attribution rules bringing entities together?
How are Section 179 and credits currently being allocated?
Would an LLC or different ownership structure work better?
Work with us
Multi-entity planning support
Tandy Consulting Inc. helps business owners in Fullerton and throughout Orange County evaluate controlled group exposure, coordinate deductions, and design tax-smart structures for multiple corporations and LLCs.
Insert your preferred contact form, phone number, or scheduling link here so readers can book a controlled group review session.
