LLC Taxed as S-Corporation

S-Corporation Conversion

LLC Taxed as S-Corporation

Optimize Your Business with S-Corporation Conversion

Converting your LLC to be taxed as an S-corporation can unlock significant tax savings and boost your business’s financial efficiency. By leveraging the advantages of S-corporation taxation, you can minimize payroll taxes while still enjoying the personal asset protection benefits of an LLC.

Maximize Savings with Strategic Tax Planning

An LLC taxed as an S-corporation allows you to split your income into salary and distributions, reducing the portion subject to self-employment taxes. This strategy helps you retain more of your hard-earned profits while staying compliant with tax regulations.

S-Corporation Tax Savings

S-Corporation is a tax designation that allows businesses to pass income, losses, deductions, and credits through to their shareholders for federal tax purposes. This helps avoid the double taxation typically associated with C-Corporation.

Benefits of S-Corporation Conversion

Self-Employment Tax Savings

As an LLC member, you’re subject to self-employment taxes on the entire net income of the business.

However, if your LLC elects to be taxed as a S-Corporation, you can classify part of your income as a salary and the remaining as distributions.

Only the salary portion is subject to self-employment taxes.

Pass-Through Taxation

Like a standard LLC, an S-Corp allows for pass-through taxation, meaning the business itself is not taxed.

Instead, profits and losses are reported on the owners’ personal tax returns.

Important Consideration

Reasonable Salary Requirement: The IRS requires that you pay yourself a reasonable salary. This is a critical component to ensure compliance and avoid penalties.

Example of Tax Savings

Let’s assume your LLC has a net income of $100,000.
You could save approximately $7,650 with S-Corporation conversion.

LLC Taxed as a Sole Proprietorship (Schedule C)

Entire $100,000 is subject to self-employment tax (15.3%)
Self-Employment Tax: $15,300

LLC Taxed as an S-Corporation

Suppose you decide a reasonable salary for yourself is $50,000
Salary Subject to Self-Employment Tax: $50,000 X 15.3% = $7,650
Remaining $50,000 is taken as distribution (K-1) and is not subject to self-employment tax

Total Tax Saving: $7,650

Self-Employment Tax Savings: $15,300 – $7,650 = $7,650

* This is an estimated and the actual tax savings may differ depending on the other conditions.

Comprehensive Conversion Services for a Smooth Transition

Our expert team ensures a seamless transition to S-corporation taxation, handling all necessary paperwork, filings, and compliance requirements.
Focus on growing your business while we take care of the details to help you save more.

LLC Formation
(Limited Liability Company)

Texas LLC Formation

Application for IRS Employer Identification Number (EIN)

Filing of Beneficial Ownership Information Report (BOI)

Filing of Form 2553 for S-Corporation Election

Template of LLC Operating Agreement

Tax advice for supporting business growth and maximizing tax savings