S Corp or LLC This Year: Which Election Actually Lowers Your Total Tax Bill?
Same business, same profit. One election can cut your total tax bill. It’s not vibes — it’s math. Here’s how to decide.
Summary of What This Blog Covers
- LLC default vs S Corp election impact at different profit levels
- Levers: payroll vs distributions, reasonable salary, SE tax, QBI, state quirks, admin
- Decision tree, timing windows, checklists, worked examples
The Core Trade-Off
LLC default → full SE tax on profit.
S Corp → salary hits payroll tax, distributions usually escape SE tax.
The Levers That Move Results
Reasonable salary, QBI wages, state fees, admin costs, fringe benefits, multi-state footprint.
When S Corp Wins
Profits consistently > ~$80k–$100k, can pay reasonable salary without starving cash, low state S Corp fees.
When LLC Default Wins
Lower profits, high state fees, complex fringes, or you value simplicity over savings.
Decision Tree (copy-paste)
Profit > $100k? → Model salary + savings
Savings > payroll + admin + state fees? → S Corp
QBI safe either way? → Go S Corp
Else → Stay LLC default
Timing & Setup
File Form 2553 by March 15 for retroactive. New entity → 75 days from formation.
S Corp Election Checklist
☐ Run profit projection
☐ Model reasonable salary
☐ Compare total tax + fees
☐ File Form 2553 on time
☐ Set payroll cadence
☐ Document salary memo
Book Your Entity Election Session
Insogna runs state-aware modeling: salary sweet spot, total tax comparison, QBI impact, Form 2553 timing, and a go/no-go memo. Whether you searched “S Corp vs LLC,” “Austin Texas CPA for entity election,” or “tax accountant near me for S corp,” we turn folklore into your custom math.
Frequently Asked Questions
1) What’s a ballpark profit for S Corp to win?
~$80k–$100k+, depending on state fees and reasonable salary.
2) Does S Corp kill QBI?
No — salary counts as QBI wages. Distributions don’t reduce QBI.
3) State fees a deal-breaker?
In high-fee states (CA $800/year), sometimes yes. We run the state-specific math.
4) Can I switch back to LLC default?
Yes — but 5-year wait to re-elect S Corp. Plan carefully.
5) When to involve a pro?
Before filing Form 2553. State nuances + reasonable salary documentation matter.
