Should my LLC elect S-corp status?

An S-corp election can lower self-employment tax, but only after you pay yourself a reasonable salary and cover the added payroll and filing costs. Whether it helps depends on your profit, a defensible salary for your role, and those added costs. Run the numbers with your CPA before electing.

Why it matters

The election is easy to make and annoying to undo. The savings people quote often skip the salary requirement and the cost of running payroll.

Example

At a modest profit, payroll fees and a reasonable salary can eat most of the savings. At a higher, steady profit, the math can clearly work. Same rule, different answer.

Take this to your CPA

1. At my profit, does the math work after payroll costs?
2. What's a reasonable salary for my role, and how do we support it?
3. What extra filings and deadlines come with this?

Sources

• IRS: S corporation compensation and medical insurance issues
• IRC §1362 (election)

These are my opinions, not gospel. Take this to a CPA who cares about you.