S-Corp Election

Convert LLC to S Corp

You are running an LLC, and right now every dollar of profit is hit with self-employment tax. When you convert to an S Corp, that changes. You run part of the profit through payroll as your wage and pull the remainder out as distributions — those distributions never hit self-employment tax.

See if an S Corp election fits

Salary-vs-distribution math run first

Form 2553 filed + payroll set up

CPA-led, not a filing mill

The Short Version

Converting an LLC to an S Corp does not change your legal entity. You keep the LLC and file one IRS form — Form 2553 — to change how the business is taxed.
The whole move comes down to one split: a reasonable salary that gets taxed like a paycheck and distributions that walk past self-employment tax. The savings only show up once profit is high enough to cover a real salary.
The election has a deadline: generally two months and 15 days after the start of the tax year you want it to count for. Miss it and you usually wait a year, unless you qualify for late relief.

Self-employment tax runs 15.3% on net earnings — 12.4% toward Social Security, 2.9% toward Medicare. Filing the S-corp election takes a single form; getting your salary figure and payroll setup right is the part that decides whether you save anything at all.

We look at your business and personal return together. That means the salary figure we land on accounts for more than the payroll math — it factors in your other income, retirement contributions, and the qualified business income deduction. A general filer who only sees the business return tends to miss that.

What Converting an LLC to an S Corp Actually Changes

Four things shift when Form 2553 is accepted. Understand each before you file:

A Label for the IRS, Not a New Company

At the state level, your LLC is still an LLC. Form 2553 just asks the IRS to tax it as an S corporation. No new registration, no new EIN, no new bank account.

How the Money Leaves the Business

Instead of pulling everything as owner draws, you cut yourself a W-2 paycheck AND take distributions on top of it. Both matter for the tax math.

What Lands on Paper

The business files its own return on Form 1120-S. That return hands you a Schedule K-1 covering your slice of the leftover profit — which flows to your personal return.

Your New Obligations

Payroll (real wages, on time), a separate business return (1120-S), and a reasonable-salary rule the IRS can challenge. See <a href="https://dimovtax.com/s-corp-reasonable-compensation/">S-corp reasonable compensation</a> for how we set that number defensibly.

How We Handle the Conversion

Run the numbers

We model your profit as salary plus distributions, factor in payroll cost and the extra return, and tell you the net result — rather than assuming it helps. A conversion that costs more than it saves is common when profit is modest.

File the election

We prepare and file Form 2553 with the correct effective date and shareholder consents, and track it to the IRS acceptance notice. Missed the deadline? See <a href="https://dimovtax.com/2553-s-corp-late-election/">Late S-corp election</a> for the relief path.

Set up payroll and books

We set a defensible salary, get payroll running so the wages are real and on time, and align your bookkeeping to the new structure. Post-conversion, you're an S-corp in every operational sense.

Why Owners Switch With Us

Owners come to us after a year of paying tax on profit they did not need to.

$1.5B+

in tax savings identified for clients

63%

of clients come back year after year

70+

tax and financial services under one roof

15+ yrs

of senior experience per engagement

What the Work Costs

Cost depends on whether this is a clean current-year election or a late one, whether you need payroll set up from scratch, and how much bookkeeping cleanup the new structure needs. We quote after a short look at your profit and how you currently pay yourself, so the fee matches the actual work.

The most valuable part isn't the filing — it's the salary decision we help you defend. That number determines your annual tax bill for years to come.

Request a conversion quote. Fee matches the actual work. No cookie-cutter pricing.

The Deadline That Catches People

The election has a deadline: two months and 15 days after the start of the tax year you want it to count for. Miss it and the election usually slips a full year — which is a year of self-employment tax you cannot get back.

A conversion when profit is too low also backfires: a reasonable salary eats most of the profit, and the payroll cost plus the extra 1120-S return cancels the benefit. We check that first before we recommend the switch. If the numbers don't work yet, we say so.

2 mo 15 days

Form 2553 deadline after tax year starts — miss it and wait a full year (unless you qualify for late relief)

15.3%

self-employment tax rate you keep paying on every dollar of profit until the election takes effect

100 owners max

plus no nonresident-alien owners and one class of ownership — basic S-corp eligibility limits

Sources: IRS Form 2553 Instructions; IRS Self-Employment Tax

Signs You Are Ready to Convert

A good fit if:

Your LLC profit is consistently past the point where a market-rate salary still leaves a meaningful distribution
You are paying self-employment tax at 15.3% on the full profit
You want the election to count for THIS year (Form 2553 filed within about 2 months and 15 days of the tax year starting)
You have no nonresident-alien owners, no more than 100 owners, and a single class of ownership interest
You're ready to run payroll and file a separate business return

Just starting? See LLC taxed as S-corp for the concept. Setting the right salary is on S-corp reasonable compensation. Missed the deadline? See late S-corp election.

See If an S Corp Election Fits

Send us a sense of your annual profit and how you currently take money out of the LLC, and we will tell you whether converting saves you enough to bother.

"We had over a hundred clients this last tax season that were in the wrong business structure. And on average, they overpaid anywhere between a few thousand to even tens of thousands of dollars in tax just because they did not have the right business structure for themselves."
— George Dimov, CPA, Founder of Dimov Tax

Confidential, handled by a CPA. Not a call center.

Reviewed by George Dimov, CPA

Founder of Dimov Tax

15+ years advising owners on entity structure and S corp elections.