Published by AE Tax Advisors Team • 2026-01-28

Restaurant Group Restructuring Saves $88,000 Across 4 Entities

The Client

Maria Castellano owned three restaurants in Nashville, Tennessee -- an Italian bistro, a taco bar, and a brunch spot -- all operating under a single LLC. Combined annual revenue was $3.4 million with net income of $520,000 across all three locations.

The Problem

All three restaurants operated under one LLC, meaning profitable locations subsidized struggling ones without any strategic tax benefit. Maria was paying self-employment tax on the full $520,000 and had no entity-level separation for liability or tax planning. Her total annual tax burden was $168,000.

Our Strategy

We restructured into four entities. Each restaurant received its own LLC (S-Corp election), and a fourth management company LLC handled centralized operations -- purchasing, accounting, marketing, and HR -- charging each restaurant a 6% management fee. We set Maria's aggregate salary at $150,000 across the entities, benchmarked against restaurant group operator compensation. We also implemented tip credit optimization and FICA tip credit claims.

The Results

The four-entity structure saved $38,000 in self-employment taxes, unlocked $22,000 in FICA tip credits that had never been claimed, optimized QBI deductions across entities for $18,000 in savings, and provided $10,000 in additional deductions through the management company's accountable plan. Total annual savings: $88,000.

Key Takeaway

Restaurant groups operating multiple locations under a single entity are missing significant tax savings. Separating each location with a centralized management company enables strategic fee allocation, tip credit optimization, and proper liability isolation.