Episode Details

Will electing S Corporation status ALWAYS save your business thousands in taxes? While that can be true, an S Corp also brings additional payroll requirements, tax filings, costs, and responsibilities.

In this episode, we break down how an S Corp reduces self-employment taxes, when the election usually makes financial sense, and which factors you need to consider before making the switch.

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Chapters:

(00:00) What Is an S Corporation?
An S Corp is a tax election for an existing LLC or corporation, not a separate type of business entity.

(03:00) How an S Corp Can Reduce Your Taxes
Splitting business income between a reasonable salary and distributions can reduce the amount subject to self-employment taxes.

(05:00) When Does an S Corp Start Making Sense?
An S Corp generally becomes worth exploring when a business consistently earns around $60,000 or more in annual profit.

(08:00) Who Is a Good Candidate for an S Corp?
Consistent profit, active owner involvement, clean bookkeeping, and reliable cash flow are important signs that an S Corp could be a good fit.

(10:00) When an S Corp May Not Save You Money
 Low or inconsistent profit, high reasonable compensation, state-level taxes, and an existing high-paying W-2 job can change the calculation.

(12:00) The Reasonable Salary Requirement
 S Corp owners who actively work in the business must pay themselves reasonable W-2 compensation before taking distributions.

(13:00) How Often Should an S Corp Owner Run Payroll?
Monthly or biweekly payroll is generally the safest approach, while waiting until the end of the year can create compliance and cash-flow problems.

(14:00) Hidden S Corp Costs and Responsibilities 

Payroll filings, W-2s, bookkeeping, accountable plans, health insurance reporting, and salary documentation must all be handled correctly.

(15:00) The S Corp Decision Framework
Use these questions to evaluate profitability, salary, payroll, state taxes, bookkeeping, and whether the potential savings exceed the added costs.

Podcast Host:

Mike Jesowshek, CPA – Founder and Host of Small Business Tax Savings Podcast
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🎙 ABOUT THE PODCAST
The Small Business Tax Savings Podcast is your go-to resource for cutting-edge tax strategies to help entrepreneurs legally slash their tax bills. Hosted by Mike Jesowshek, CPA, this show breaks down complex tax topics into clear, no-fluff insights so you can keep more of your hard-earned money.