S-Corp Election

Have you seen the videos on TikTok, YouTube and Facebook about becoming an S-Corporation? This amazing tax strategy has so much misinformation around it. We even find that experienced Accountants and CPA’s are very misinformed about this strategy.

If you have been told that an S-corporation may not fit your business and you are profiting minimum 40k net profit, you would be wise in seeking a second opinion.

How does it work?

When you make profit in your business as a traditional LLC filing as a Sole Proprietor (Schedule C), you have to pay Medicare and Social Security on 100% of those earnings, which equals 15.3%.

The S-Corp election makes it so you are put on payroll. Our team has used the Kohler Payroll Matrix, which has gone through every court case and IRS publication to find the absolute best payroll strategy.

Example:

You make 100k in your business net profit (after expenses, taxes, etc)

LLC (Sole Propertior)

Self Employment Taxes 15.3% ($15,300)
Owners Draw ($100,000) = Income Tax Added As Well

LLC (S-Corporation)

Payroll of $40,000
Self Employment Taxes 15.3% ($6,120) = $9,180 of Tax Savings!
Owners Draw ($60,000) = Income Tax Only

Important Steps!

• We can only backdate the election from the date the LLC was created

• It is usually not beneficial to backdate the S-Corp election prior to the current year. Usually we can backdate to 1/1/(current year)

• Payroll must be made from the beginning of the election. Backdating payroll can be done to the 1/1/(current year)

• Proper Bookkeeping and tracking of financial records are a must

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