The structure you set up at $50k isn't right at $500k.

Most LLCs pay 15.3% self-employment tax on every dollar of profit. That's not a rounding error — at $300k in net profit, that's $45,900 before you've paid a dollar of income tax.

An S-Corp election, filed on Form 2553, lets you split profit into two buckets: a reasonable salary and distributions. Only the salary portion is subject to SE tax. The distributions pass through to your personal return without the 15.3% charge on top.

The math matters at scale:

• At $300k revenue, the S-Corp election barely pencils — payroll costs and compliance overhead eat a meaningful share of the savings
• At $500k–$800k, the savings typically run $15,000–$30,000 per year
• At $800k and above, it's usually $20,000–$50,000 annually — depending on the salary you set

Key conditions to understand before filing:

• Reasonable salary requirement: The IRS requires that you pay yourself a salary consistent with what you'd pay someone else to do your job. Too low, and the IRS can reclassify distributions as wages — plus penalties
• Payroll obligations: You must run an actual payroll. That means payroll taxes, W-2s, quarterly filings
• State-level recognition: Not every state treats S-Corps the same way. Some impose entity-level taxes. We check state rules as part of every election analysis
• Timing: The 2553 must be filed within 75 days of the start of the tax year for the election to take effect that year. Miss the window and you wait until next year

We model the full picture — salary, payroll costs, state exposure, compliance overhead — before recommending an election. Sometimes the answer is not yet.

S-Corps pass income through to the owner's personal return. No entity-level federal income tax. The business itself pays no federal income tax — the profit (and loss) flows to your 1040. For most owner-operated businesses, this is the right structure.

C-Corps pay corporate income tax — currently 21% — and then shareholders pay tax again on dividends. This is the classic double-taxation problem. It's real, and it's significant.

When does a C-Corp make sense?

• Venture-backed companies expecting Qualified Small Business Stock (QSBS) treatment — which requires a C-Corp and can exclude up to $10M in gains
• Businesses planning to retain earnings at the corporate level rather than distributing them — the 21% rate may be lower than your personal marginal rate
• Companies with international investors or complex equity — S-Corps have restrictions on share classes and foreign shareholders

For most small businesses doing $500k–$10M without VC funding, an S-Corp election or LLC pass-through is correct. We've yet to see a founder-operated professional services firm where a C-Corp structure made financial sense over a 5-year horizon.

If you've been told you need a C-Corp but you're not raising venture capital, it's worth a second look.

Some businesses benefit from splitting operations across multiple entities — typically an operating company paired with a holding company, or separating a professional practice from the real estate it occupies.

When it makes sense:

• Asset protection: A lawsuit against the operating company cannot reach assets held in the holding company — real estate, equipment, IP, cash reserves
• Management fee arrangements: A holding company can charge management fees to operating entities, moving income upstream under controlled conditions
• Real estate separated from operations: The operating company pays rent to the real estate entity you own — creating passive rental income while protecting the building from business liability
• IP held separately: Patents, trademarks, and proprietary systems held in a separate IP entity and licensed to the operating company

When it doesn't make sense:

• Administrative overhead — multiple payrolls, bank accounts, tax returns, and compliance calendars
• For most businesses under $2M in revenue, the cost of the structure exceeds the benefit
• Multi-entity structures require ongoing maintenance — intercompany agreements, proper documentation, separate accounting — to hold up legally

We model the full picture, including ongoing compliance costs, before recommending any structure change.

We handle the full lifecycle — from choosing the right structure to keeping it compliant year after year.

• Entity formation: Articles of organization or incorporation, EIN application, and operating agreement or bylaws
• Form 2553 S-Corp election: Filed with the IRS with supporting documentation; we track confirmation and follow up if the IRS doesn't respond within the standard window
• State-level notifications and registrations: Not all S-Corp elections are automatic at the state level — we handle any required state filings
• Payroll setup: Establishing a compliant payroll for the required reasonable salary, including quarterly filings and year-end W-2
• Annual filing of Form 1120-S or 1065: Your entity return, prepared and filed as part of our ongoing engagement
• Ongoing compliance calendar: Quarterly estimated taxes, annual report deadlines, and state registration renewals — tracked so nothing falls through the cracks

Pricing: One-time flat fee for entity setup or election filing, quoted after a 30-minute call where we review your current situation and revenue trajectory. No hourly billing on the setup work.