Plug in your company’s profit and see how taking part of it as a salary (and the rest as a distribution) could reduce your tax bill. Spoiler alert: The savings might surprise you.
An S Corporation isn’t a new type of legal entity—it’s just a different way to have your existing company (likely an LLC or PLLC) taxed. But that small change can have a big impact on how much tax you pay as an owner.
With an S Corp election, you still own your company as usual. But instead of taking 100% of your profits as self-employment income—and paying self-employment tax on all of it—you split that income. You pay yourself a reasonable salary as an owner, and take the rest as a distribution.
Here’s the kicker: Distributions aren’t subject to self-employment tax. That’s where the savings come in.
It’s just a different tax classification for your existing LLC or PLLC
And then take the rest as a shareholder distribution
Which can lead to significant tax savings
Let’s say your company nets $300,000 in profit. If you’re taxed as a regular LLC, you could owe around $30,000 in self-employment tax. If you elect S Corp status, and pay yourself a salary of $90,000 while taking the other $210,000 as a distribution, your self-employment tax might drop to around $14,000.
You pay around
in self-employment tax
You pay around
in self-employment tax
That’s $16,000+ that could stay in your practice—or be reinvested into new equipment, staff bonuses, or your retirement plan.
Ready to make the switch or have questions? Our team can guide you through setting up your S-Corp and maximizing your savings.
We’ll handle the paperwork to elect S Corp status with the IRS, so you can start saving on taxes.
Get help setting up a compliant payroll system, paying yourself a reasonable salary the right way.
We’ll prepare your 1120S Business Tax return and 1040 Individual Tax return, and manage filings and deadlines to keep your S Corp in good standing.
