Should I Become an S Corp?

Why become an S Corp?

Your corporation doesn’t have to pay federal corporate income tax. Instead, the company’s owners report that income (or loss) on their own personal income tax returns. As an S Corp you don’t have to pay self-employment tax which is 15.3% of your profits for the year as an LLC. When you’re an S Corp you pay Payroll tax and instead of taxing 15.3% on all of your profit for the year, you only get taxed on 15.3% of your reasonable comp salary.

Have a bookkeeper

Not everyone should be an S Corp. You’ll need accurate numbers first. If you’re thinking about switching to be an S Corp having a bookkeeper is smart. Things change and every time you get paid through payroll it affects all the different accounts on your Profit & Loss. Bottom line: You want things documented and to know your numbers in order to know if it is time to be an S Corp.

Talk to your CPA

Talk to your CPA or tax preparer to know if becoming an S Corp is right for you. Get expert advice based on real data from your bookkeeper.

Deadline

The deadline to file your taxes as an S Corp is March 15, 2024.

To file an extension you can submit IRS Form 7004, which grants an automatic six-month extension to submit your paperwork. This extension does not exempt you from paying your taxes on time and in full though.