“Should I Be an S Corp?”

It’s one of the most common questions I get from clients.

And with good reason. S corporations come with a number of advantages, including:

• a reduction in payroll taxes because you do not pay self employement tax on S corp profits

• the ability to deduct the salary your business pays you, which you cannot do as an LLC

And of the best things about being an LLC is that you can elect to get taxed as an S corp.

But when should you do that?

I tell my clients to start talking to their tax advisor at about $75,000 in profit, but it depends on a number of factors, including:

• your overall tax situation

• additional requirements your state imposes

• whether your business has the cash flow to pay you a reasonable salary (which the IRS requires for S corps)

• your business’s expected future profit levels

My S corp tax calculator helps you figure out how much you could save in federal taxes by filing as an S corp. Download it and see how much you could save and then talk to your tax advisor.