Money · 5 min read

Would an S-Corp save me money?

Often yes, once you are keeping a decent profit. Below that, it costs more than it saves.

The short answer

S-Corp usually starts paying off somewhere around $50,000 in annual profit. Below that, the extra payroll and filing costs generally eat the savings.

What it actually is

S-Corp is not a different kind of company. It is a tax election — a form you file that changes how the IRS treats the money your business makes. Your LLC stays an LLC.

Why it can save money

As a standard LLC you pay self-employment tax — about 15.3% — on all your profit. With S-Corp, you split that profit into a salary and a distribution. You pay self-employment tax on the salary only. The distribution avoids it.

So if you make $90,000 and pay yourself a $50,000 salary, the remaining $40,000 skips a 15.3% tax. That is roughly $6,000 saved.

Why it is not free

You have to run real payroll, which costs money and takes time each month.
You file a separate business tax return, which usually means paying an accountant more.
You must justify your salary if asked, so the number needs to be defensible.

The honest threshold

Under roughly $50,000 profit, those costs usually exceed the savings. We will tell you plainly when it is not worth it yet — there is no reason to sell you paperwork that loses you money.

When to revisit

Profit moves. Check it again any year your business grows meaningfully, and the answer may flip. It is not a one-time decision you are stuck with.

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