LLC vs S-Corp: The Comparison Your CPA Should Have Given You.

The general threshold is around $75K-$80K in net business income. Below that, the added compliance costs of payroll and a separate S-Corp tax return often outweigh the self-employment tax savings. Above that, the savings grow quickly. At $150K net income, you could save roughly $8,000 per year; at $300K, roughly $17,000.

No. Your LLC remains your LLC. The S-Corp election is purely a tax classification change with the IRS. Your legal entity, operating agreement, and liability protection are completely unaffected. You file one form (Form 2553) and the IRS simply treats your income differently for tax purposes.

Filing Form 2553 is free. The ongoing costs are payroll processing (typically $50-$150/month through a provider like Gusto or ADP) and a more complex tax return (an S-Corp return runs $1,500-$3,000 at most firms vs. $500-$1,000 for a simple Schedule C). For most business owners above the threshold, the tax savings far exceed these costs.

The IRS requires S-Corp owner-employees to pay themselves a reasonable salary before taking distributions. "Reasonable" means comparable to what someone in your role and industry would earn. Setting it too low invites IRS scrutiny; setting it too high negates the tax benefit. We help determine the right number using industry data and IRS guidelines.

Yes, but there is a waiting period. Once you elect S-Corp status, you must generally wait five tax years before revoking the election and reverting to default LLC taxation. This is why getting the analysis right before electing is important. We run the numbers for your specific situation to make sure S-Corp is the right move before you file.