When does it make sense to elect S-Corp tax status?

An S-Corp election typically becomes financially advantageous once your business generates $70,000 to $80,000+ in consistent net annual profit. At this threshold, the self-employment tax savings significantly outweigh the administrative costs of payroll and corporate return filing.

How does an S-Corp save on taxes?

In a standard LLC or sole proprietorship, 100% of net profits are subject to the 15.3% self-employment tax (FICA). In an S-Corp, only the officer's reasonable W-2 salary is subject to FICA. The remaining profit is taken as shareholder distributions, which are completely exempt from the 15.3% self-employment tax.

What is IRS 'Reasonable Compensation' for an S-Corp owner?

The IRS requires S-Corp shareholder-employees to pay themselves a fair market wage for the services they provide before taking distributions. JANSS CPA conducts formal reasonable compensation benchmarking to establish a defensible salary that maximizes tax savings while protecting against audit risk.

How do I make the S-Corp election?

You file Form 2553 with the IRS within 75 days of the start of the tax year (or qualify under late-election relief provisions). JANSS CPA handles the entire election filing, payroll onboarding, and corporate compliance.

S-Corporation Tax Strategy

S-Corp Tax Savings Calculator

See how much you can legally save on self-employment taxes (FICA) by electing S-Corporation status and splitting your revenue between salary and shareholder distributions.

Annual Net Business Profit

Total revenue minus business operating expenses.

Reasonable W-2 Officer Salary

Fair market wage paid to yourself as an employee.

Shareholder Distribution

$85,000

Profit taken as dividends (100% exempt from the 15.3% self-employment tax).

Annual Self-Employment Tax Saved
$13,005
Direct cash savings retained in your business every year via FICA reduction.

5-Year Cumulative Tax Savings

$65,025

Total estimated tax retained in your pocket over a 5-year operating window.

Structure Comparison: LLC / Sole Prop vs S-Corporation

Tax Component	Standard LLC / Sole Prop	S-Corporation (JANSS CPA)
Net Business Profit	$150,000	$150,000
Amount Subject to 15.3% FICA	$150,000 (100%)	$65,000 (Salary Only)
Self-Employment / FICA Tax	$22,950	$9,945
Your Annual Tax Savings	$0	+$13,005 / year

Ready to Set Up Your S-Corp & Save?

JANSS CPA handles your entire S-Corp transition: Form 2553 election filing, defensible reasonable salary benchmarking, automated payroll setup, and corporate tax returns (Form 1120-S).

Book Free S-Corp Consultation

Direct line / text: 713-714-7153

Frequently Asked Questions

When does it make sense to elect S-Corp status?

Generally, once your business generates $70,000+ in consistent net profit, an S-Corp election yields substantial tax savings that easily outweigh the modest costs of corporate bookkeeping and annual return preparation.

How does an S-Corp reduce taxes?

In a standard LLC or sole proprietorship, 100% of profits are hit with the 15.3% self-employment tax. In an S-Corp, you only pay self-employment tax on your W-2 salary. The remainder is distributed as dividends, avoiding the 15.3% tax completely.

What is 'Reasonable Compensation'?

The IRS requires S-Corp shareholder-employees to pay themselves a fair market salary based on industry data. JANSS CPA calculates your defensible salary range to protect against IRS audit risk while optimizing your tax shelter.

Can I elect S-Corp status for an existing LLC?

Yes. You do not need to dissolve or re-incorporate. We file IRS Form 2553 to elect S-Corp tax treatment for your existing Texas LLC with zero disruption to your bank accounts or contracts.