06/18/2026
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The new popular kid in the tax world?
📣 The S Corporation.
A few years ago, everybody was talking about LLCs.
Now it seems like everybody is talking about S Corps.
And while an S Corp can absolutely save taxes…
Most people don’t actually understand HOW.
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Here’s the simplified version:
If you’re a sole proprietor, your business profit is generally exposed to:
💰 Federal income tax
💰 State income tax
💰 Self-employment tax
That self-employment tax is where things can get expensive.
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This is especially true for:
💼 Consultants
💻 Coaches
📈 Service-based businesses
🎯 Businesses with high profit margins
Because a large percentage of the profit may be exposed to self-employment tax.
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This is where an S Corp can potentially help.
With an S Corp, business owners typically receive income in two ways:
1️⃣ Salary
2️⃣ Distributions
The key distinction:
📌 Salary is subject to payroll taxes.
📌 Distributions generally are not subject to self-employment tax.
That’s where the potential savings come from.
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But here’s the mistake I see all the time:
People hear “S Corp saves taxes” and immediately rush to make the election.
Not so fast.
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The IRS requires business owners to pay themselves a:
👉 Reasonable salary.
You can’t just pay yourself $10,000 and take everything else as distributions.
That’s not how it works.
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An S Corp can be a fantastic tool.
For the RIGHT business.
At the RIGHT income level.
At the RIGHT time.
But it’s not automatically the best move for every business owner.
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Good tax planning isn’t about following trends.
It’s about understanding your numbers, your goals, and your situation before making the jump.
Because the best entity structure is the one that fits YOUR business—not the one that’s trending on social media.
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