Your business profit BEFORE paying yourself a salary. Schedule C line 31 figure.
IRS requires S-corp owner-employees take a 'reasonable salary' for the work they do. Industry guideline is 30%–50% of net profit, scaled by role and revenue. We default to 40%.
S-corp election adds quarterly 941 filings, year-end W-2, and a corporate 1120-S return. We default to $1,800/year (Gusto + tax prep delta).
Estimates only. Actual savings depend on your specific facts — state taxes, QBI deduction, retirement contributions, healthcare. Book a consultation for a real analysis.
As an LLC taxed as sole prop, all net profit is subject to self-employment tax: 12.4% Social Security on the first $176,100 + 2.9% Medicare on everything (with an extra 0.9% over high-income thresholds).
As an S-Corp, only your reasonable salary is subject to FICA (15.3% combined employer/employee). The remaining profit comes out as distribution — NOT subject to SE tax. You add payroll + tax-prep cost on top.
We file the 2553 election, run your payroll, and prep the 1120-S. Built into our Bookkeeping Advisory tier ($700/mo) — annual return included.