If your practice is profitable and you are still taxed as a sole proprietor or single-member LLC, every dollar of profit is exposed to self-employment tax. An S corporation election can change that, or it can cost you more than it saves. This service tells you which, using your numbers instead of somebody else's.
This is the part that almost never gets explained properly, so here it is plainly.
As a sole proprietor or single-member LLC, essentially all of your practice profit is subject to self-employment tax, the Social Security and Medicare tax that an employer and employee would otherwise split. It applies to the profit whether you take the money out or leave it in the business.
Elect S corporation status and your practice becomes a separate filer. You must then pay yourself a reasonable W-2 salary, which is subject to employment taxes as any salary would be. Profit above that salary can be taken as a distribution, which is not subject to self-employment tax.
That is the entire mechanism. The savings come from the gap between your profit and your reasonable salary, which is also why the salary cannot simply be set to a token amount. That gap is the thing the IRS examines.
And it is not free. An election brings payroll, quarterly employment filings, W-2s, a separate 1120-S return and, in some states, an entity-level tax. A real analysis subtracts all of that before it claims a saving.
Both are written documents you keep. Neither is a verbal opinion you have to remember six months later when a notice arrives.
The complete analysis: whether an election saves your practice money once payroll, compliance and state-level costs are subtracted, what salary would be defensible, what the election would look like implemented, and when to file.
Final fee depends on entity history, number of owners and state complexity.
For practices that are already an S corporation, or that have decided to elect. A documented, defensible owner salary built from your role, your hours, your license and comparable market data, on file before anyone asks for it.
The single biggest IRS red flag for S corporations is an unsupportable owner salary.
These figures are illustrative and deliberately simplified, they exist to show the mechanism, not to predict your result. Read the note underneath before you take a number from this table anywhere.
| Practice profit | Taxed as sole proprietor | Illustrative reasonable salary | Taxed as S corporation | Difference |
|---|---|---|---|---|
| $80,000 | $12,240 | $55,000 | $8,415 | $3,825 |
| $120,000 | $18,360 | $75,000 | $11,475 | $6,885 |
| $160,000 | $24,480 | $95,000 | $14,535 | $9,945 |
Illustration only. Each figure applies a flat 15.3% combined Social Security and Medicare rate to profit or to salary. It ignores the Social Security wage base cap, additional Medicare tax, the qualified business income deduction, income tax itself, state and local taxes, and the ongoing cost of payroll, employment tax filings and a separate 1120-S return. The "reasonable salary" column is an assumption, not a recommendation, yours depends on your license, hours and role. Your actual result may be larger, smaller, or negative. Working out which is precisely what the S Corp Strategy Report is for.
The S Corp Strategy Report is written for you to read, act on and hand to whoever needs it next, your payroll provider, your attorney, or a future accountant.
Some of these are eligibility rules. Some are simply the conditions under which the analysis is worth paying for.
Shareholders must meet federal S corporation eligibility requirements, including not being treated as nonresident aliens for federal tax purposes. S corporations also restrict who may hold shares, generally individuals rather than corporations or partnerships, subject to a shareholder limit, with only one class of stock permitted.
The saving comes from the gap between profit and a reasonable salary. If your profit is modest or highly volatile, that gap may not cover the recurring cost of payroll and a second return. Stability matters as much as size.
The analysis is only as reliable as the profit figure feeding it. If your books are months behind, clean-up comes first, otherwise you are paying for a projection built on a guess.
An election is not a paperwork trick. You will be an employee of your own practice, paid on a schedule, with employment tax filings every quarter. If that is unwelcome, the election is unwelcome.
Some states impose an entity-level tax, franchise tax or minimum fee on S corporations, and a small number do not follow the federal election. Your state is checked as part of the work. It can change the answer entirely.
Form 2553 has a deadline tied to the tax year you want the election to take effect. Late relief exists in some circumstances, but the analysis includes confirming which year is realistically available to you.
Both are free, neither requires you to become a client, and both will make the eventual conversation shorter.
Put in your profit and see exactly what self-employment tax costs you this year. That figure is the one an S corporation election works against, so it is the right place to start.
Run the numbersThe seven things to weigh before you elect, including the biggest IRS red flag for S corporations, how to pay yourself and stay compliant, the state rules people forget, and whether the benefits outweigh the costs for your practice.
Get the checklistA dedicated booking link for this service. We confirm eligibility, look at your entity and profit, and agree scope and fee before any work begins.
Prior returns, current financials, entity documents and payroll detail if you have any, uploaded to the secure client portal, not emailed around.
Profit, reasonable salary, payroll and compliance costs, state treatment, QBI interaction and retirement impact, modeled together rather than one at a time.
You receive the written report and we walk through it. If the answer is yes, you also get the implementation checklist and the filing deadlines that apply to you.
