The most important change is that the much lower individual income tax rates after tax reform, from a top rate of 70% when Reagan entered office to 28% after the reform, caused billions in business income to switch from corporate tax returns to individual tax returns as subchapter S corporations, partnerships, LLCs (limited liability partnerships), and proprietorships.

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For many of these small business owners, the maximum individual income tax rate will rise from 35% to 39.6% around 2013, says BDO.

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An individual who invested directly in one or more business-development companies and received income from them could be taxed on a portion of it at preferential rates of 15% or lower.

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