How It Works
By electing S-Corp status for your LLC or corporation, you can split your business income between W-2 wages (subject to FICA taxes) and distributions (not subject to FICA). This can save 15.3% in self-employment taxes on the distribution portion, which can be substantial for high-income business owners.
Who Qualifies
- Profitable LLCs and corporations
- Net income of $50K+ (break-even point)
- Single owner or limited shareholders
- US citizens or residents only
Key Requirements
- Reasonable salary requirement
- Payroll setup and compliance
- Form 2553 election
- Quarterly payroll tax filings
Documentation Needed
Form 2553, payroll records, corporate minutes, reasonable compensation analysis.