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You are running an LLC, and right now every dollar of profit is hit with self-employment tax. When you convert LLC to 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 the self-employment tax.
That rate runs 15.3% on net earnings: 12.4% toward Social Security, 2.9% toward Medicare. Filing the election takes a single form; getting your salary figure and payroll setup right is the part that decides whether you save anything at all.
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.
instead of pulling everything as owner draws, you cut yourself a W-2 paycheck and take distributions on top of it.
the business files its own return on Form 1120-S, and that return hands you a Schedule K-1 covering your slice of the leftover profit.
You take on payroll, a separate business return, and a reasonable-salary rule the IRS can challenge.
Filing the election is one step. Running the business as an S corp is the part that has to be set up correctly.
The savings come from the part of profit you take as distributions instead of salary. Below a certain profit level, a reasonable salary eats most of the profit, and the payroll cost plus the extra return cancels the benefit. We run your actual numbers before recommending it, because a conversion that costs more than it saves is common when profit is modest.
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, your retirement contributions, and the qualified business income deduction. A general filer who only sees the business return tends to miss that.
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.
We prepare and file Form 2553 with the correct effective date and shareholder consents, and track it to the IRS acceptance notice.
We set a defensible salary, get payroll running so the wages are real and on time, and align your bookkeeping to the new structure.
Owners come to us after a year of paying tax on profit they did not need to.
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.
Excellent tax preparation and financial planning. I have a lot of business plans, personal plans, and questions about how I should structure things.
They recommended changes to my tax strategy which had a significant positive impact on my return this year.
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.
That deadline is the one that catches people. Miss it and the election usually slips a full year, which is a year of self-employment tax you cannot get back.
You do not have to decide whether the S Corp math works on your own. A first look at your profit and how you pay yourself tells us whether converting is worth it, and if it is not yet, we will say so instead of selling you a structure you will regret.
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. Confidential, handled by a CPA, not a call center.
