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Know When to Become an S-Corp (and Save)
Know the exact point where switching to an S-corp starts saving you thousands in taxes, and how to make the switch.
What it solves
Choosing a structure too early wastes money, and choosing too late leaves your personal assets exposed. This guide lays out four stages, sole proprietor, LLC, S-corp election, and holding company, with the risk and trigger for each, so you know where you stand and when to talk to a CPA. It is general information, not tax advice.
What this is worth: A lawyer charges $1,000 to $1,500 to form an LLC. You will do it right yourself.
What is inside
- The sole proprietor stage: no filing, but personal assets exposed and self-employment tax on everything.
- When to form an LLC: the moment you have customers, contracts, or anything to lose.
- The S-corp election explained as a tax election on your LLC, not a new company.
- A net profit rule of thumb for when the election is worth a look with a CPA.
- The holding company stage for multiple businesses or assets, and why not to overbuild early.
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Questions, answered
No. The file explains the S-corp as a tax election on your existing LLC, not a new entity. Whether and when it makes sense depends on your profit and a reasonable salary, so confirm with a CPA.
The file gives a net profit rule of thumb for when the election is worth a look, and says the numbers depend on a reasonable salary. It is general information, not tax advice, so confirm your timing and salary with a CPA.
An honest look at your revenue and risk, and about ten minutes. You find the stage you are in now and the trigger for moving to the next one.
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