How Entrepreneurs Can Significantly Reduce 2018 Taxes by Choosing the Right Business Entity Move now to evaluate your filing options as: 1) a self-employed individual; 2) an S Corp; 3) a C Corp; or 4) an LLC

If you're confused about what type of business entity to set up -- entrepreneur or contractor -- under the new Tax Cuts & Jobs Act of 2017, you're not alone.

Related: How to Pay Zero Taxes Legally in Retirement

Whether you're an Uber driver, tech startup founder or medical professional contractor, you'll find that the new tax law will significantly impact your 2018 returns. So, don't waste any more time mulling this question because you have only a few months left to make changes that will affect your 2018 tax liability.

And that's worth noting, because, with the right tax strategy, you can save up to 10 percent to 40 percent on your taxes, permanently. So, as an entrepreneur, you should talk to a tax advisor about whether you want to be taxed as self-employed, an "S" Corp, "C" Corp or partnership.

Bottom line: If you have the right entity setup, you'll pay less tax.

The biggest tax changes in the new law for small business owners are the lower corporate tax rate of 21 percent and a potential 20 percent pass-through deduction that starts in 2018 for self-employed, sole proprietors, partnerships and S corporations.

For service businesses involving categories like doctors, lawyers and financial advisors, the taxable income of the professional involved, according to the IRS, must be below $207,500 (for a single individual) or $415,000 (married, and filing jointly) for that person to qualify.

Related: How to Pay Zero Taxes Legally in Retirement

The 20 percent deduction is considered "between the lines," as CNBC has pointed out, because it doesn't lower your adjusted gross income nor do you have to itemize to take this deduction.

Let's break down your options as a business owner:

Self-employed (example: Uber driver)

Self-employed individuals such as independent contractors and freelancers pay self-employment taxes in addition to regular income tax, to satisfy social security and Medicare requirements. If they qualify for the new 20 percent tax deduction, their top effective marginal tax rate could be reduced to 29.6 percent or less. However, these individuals will likely get better tax savings and asset protection as an S Corp or C Corp.

S-Corp (example: accountant, doctor, lawyer)

One of the biggest benefits of forming an S corp versus remaining a self-employed contractor is asset protection. An S-Corp also does not have a legal responsibility to pay taxes on its corporate income.

Instead, the owners of the company pay taxes on their personal tax return. The new tax law includes a 20 percent deduction on qualifying companies, including S Corps, with limitations. S Corps must also be domestic (meaning the company and its owners must live in the United States). Shares must be held by individuals, estates or certain trusts (not by other companies).

C-Corp (example: a health tech startup)

A C Corp may be better for tech startups or companies that have future plans for equity crowdfunding or want to go public. A C Corp is a corporation where the shareholders are taxed separately from the entity.

C corporations have no restrictions on ownership. They can have an unlimited number of shareholders, in contrast to S corporations which can have only 100 shareholders, maximum. The biggest drawback of a C corporation is a "double taxation" potential. The corporation is taxed, corporate profits first, and then shareholders are taxed again when dividends are distributed. And the corporation cannot deduct dividend distributions.

Because of the low (21 percent) corporate tax rate, many new startups will want to consider being taxed as a C corp. In addition, Section 1202 of the new tax law allows startup shareholders to sell their stock after five years, with no tax on the first $5 million of gain.

LLC (example: a real estate consulting company)

Some businesses may choose to be an LLC, and then select to file as a partnership, sole proprietor or corporation. An LLC is a legal designation, not a tax designation. The owners of the LLC report profits and losses on their personal federal tax returns as a "pass-through entity," unless the LLC owners elect to have the LLC taxed as a C corporation.

If taxed as a pass-through entity, the LLC itself does not pay federal income taxes (though some states charge an annual tax on LLCs). As part of the LLC tax process, these companies will want to fill out Form 8832 to define their entity (corporation, partnership or sole proprietorship). Assuming that the owners elect to tax the LLC as a pass-through entity, the 20 percent deduction may apply.

The impact on asset protection

In addition to tax savings, the business entity that you choose will have an impact on your asset protection. Most attorneys will tell you that if you own a business, it's not a matter of if you get sued, it's when you get sued. As a result, you'll want to establish an LLC or corporation between yourself and your actual business, to reduce the opportunity for someone to sue you personally.

With an LLC or corporation, if you get sued and your opponent wins, the opponent should only be able to take money out of that company versus your personal accounts.

To maintain asset protection and preferred tax status, owners of LLCs, S corps and C corps need to have an operating agreement or bylaws in place, maintain books and records and track their minutes.

Related: Feeling Confused by the New Tax Law's Small Business Provision? You're Not Alone.

In sum, anyone can take advantage of the tax incentives provided by our government. The task simply requires understanding the incentives and legally changing the facts to receive the corresponding benefits. The more you educate yourself on your options, the more money you can put back in your pocket. (For more information about the new tax plan impacts, read Tax-Free Wealth.)