Should you be an S-Corp?
Let’s actually do the math.
There’s no magic revenue number where every business should suddenly become an S-corp.
$50k. $75k. $100k.
You’ve probably heard all of them.
But whether an S-corp actually makes sense depends on a whole lot more than how much your business makes.
Your state. Your reasonable salary. Payroll taxes. Retirement contributions. PTET. Compliance costs. How your income may change. And, frankly, whether you want the additional work that comes with running one.
We model the whole thing before we tell you what to do.
Saving taxes isn’t the same as saving money.
An S-corp can reduce self-employment taxes.
Great.
But what happens when you add payroll costs? A separate business tax return? Additional state taxes? Ongoing compliance? Retirement contributions?
And what happens if you’re in a place like New York City, where an S-corp can create an entirely different tax result?
We don’t stop the analysis at “look how much self-employment tax you saved.”
We want to know what happens to your actual money.
We don’t analyze one version of your business.
Your income isn’t guaranteed to land on one exact number.
Neither is your salary.
And putting $0 into retirement versus maxing a SEP versus funding a 401(k) can change the answer.
So we model different scenarios.
Depending on your situation, we may compare:
- Sole proprietor vs. S-corp
- Partnership vs. S-corp
- Different income levels
- Different reasonable salaries
- No retirement contribution vs. SEP vs. 401(k)
- Federal + state tax impact
- PTET elections
- Multi-state implications
- Payroll costs
- Additional tax preparation + compliance costs
Then we look at what happens.
Not just to your taxes.
To your total cash.
Reasonable comp isn’t a number we pull out of the air.
If you’re an S-corp owner who works in the business, your salary matters.
A lot.
Too high and you may unnecessarily erode some of the tax benefit you’re trying to create.
Too low and you’ve got another problem.
Your Entity Analysis includes a formal reasonable compensation report from RC Reports that we use as part of our modeling and recommendation.
Then we can look at how different reasonable salary scenarios affect the bigger picture.
Because “my friend pays himself $40k” is not a reasonable-comp methodology.
New York City? Please do not blindly elect S-Corp status?
An S-corp can look fantastic if someone only models the federal self-employment tax savings.
Then NYC enters the chat.
New York City can change the calculation significantly. Add PTET, state-specific opportunities, reasonable compensation and the additional costs of operating an S-corp, and suddenly the answer isn’t nearly as simple as it looked.
We’ve seen business owners elect S-corp status expecting to save money and end up paying more instead.
This is exactly why we run a full Entity Analysis when the answer isn’t obvious.
One tax lever does not make a tax strategy.
And then there’s retirement.
Changing entity structure can change how much you can contribute to retirement and how much cash it takes to get there.
So we don’t just compare:
LLC tax = X
S-corp tax = Y
Look! Savings!
We can model no retirement contribution, a SEP and a 401(k) and compare both the tax result and the cash required under each scenario.
Because saving $700 in taxes by putting another $31,000 somewhere isn’t the same thing as simply saving $700.
Cash matters too.
Sometimes our answer is no.
You can technically save some money in taxes with an S-corp and still hear us say:
We don’t think you should do it.
Because an S-corp comes with additional responsibility.
Payroll. Bookkeeping. Separate tax filings. Reasonable compensation. More deadlines. More rules. More things that have to happen correctly.
If the expected benefit doesn’t justify the additional cost and work, that’s part of the analysis.
If your finances are chronically disorganized and the additional compliance is likely to become a problem, that’s part of the analysis too.
We look at qualitative and quantitative factors.
The best entity isn’t necessarily the one that produces the lowest theoretical tax bill.
It’s the one that actually makes sense for you.
What do you actually get?
A FULL ENTITY ANALYSIS
We model the relevant entity structures and tax scenarios based on your actual situation.
MULTIPLE SCENARIOS
Where appropriate, we’ll model different income, salary and retirement scenarios so the recommendation isn’t dependent on one perfectly predicted number.
REASONABLE COMPENSATION REPORT
You’ll receive a formal reasonable compensation report to support the salary assumptions we’re using.
TAX + CASH IMPACT
We don’t just show theoretical tax savings.
We look at what happens to your total cash — including the additional costs and financial requirements that come with the change.
COMPLIANCE COST + REALITY CHECK
Payroll costs. Additional tax preparation. Ongoing accounting requirements. More compliance.
The cost of operating an S-corp counts when we’re deciding whether an S-corp saves you money.
OUR RECOMMENDATION
At the end, we’ll tell you what we think you should do and why.
Not:
“Here are 14 spreadsheets. Good luck!”
A MEETING TO TALK THROUGH IT
We’ll walk through the analysis together, answer your questions and look at additional scenarios if something changes the picture.
S-CORP ENTITY ANALYSIS: $1,500.
A full analysis, reasonable compensation report, recommendation and meeting.
Already know you need an S-Corp? We can handle the setup too.
You don’t need an Entity Analysis if the answer is already clear.
If you already know an S-corp is right for you — whether that came from Countless, another CPA or your attorney — we can handle the implementation.
We’ll get everything set up so you don’t end up with an S-election and absolutely no idea what you’re supposed to do next.
S-CORP SETUP: $1,500
Had Countless perform your Entity Analysis first?
YOUR S-CORP SETUP IS $1,200.
Already an S-Corp?
You can still come to us.
Maybe the election was made but nobody helped you figure out reasonable compensation.
Maybe payroll never got set up correctly.
Maybe you’ve grown significantly since the original analysis.
Maybe you’ve moved states.
Or maybe you’re starting to wonder whether the entity you set up three years ago still makes sense for the business you have today.
“I’m already an S-corp” doesn’t mean the analysis is over forever.
Tell us what’s going on and we’ll figure out what you actually need.
Don’t elect S-Corp because someone gave you a revenue number.
Your entity structure affects more than one line on your tax return.
It affects payroll. Retirement. Compliance. Cash. State taxes. Your time.
Sometimes the math makes the answer obvious.
Sometimes it doesn’t.
That’s why we do the math.
