Should I convert my LLC to an S-corp to save on taxes?

Illustrative — not a real business

An S-corp election can reduce self-employment tax because only the salary portion you pay yourself is subject to payroll taxes, while remaining profit distributed to you as an owner is not — that is the actual mechanism, and it is real, but it only produces meaningful savings once your net business income clears a certain threshold, typically somewhere in the 60,000 to 80,000 dollar range depending on your specific numbers, below which the added costs usually eat up most or all of the savings. The IRS requires that an S-corp owner who works in the business pay themselves a 'reasonable salary' based on what a similar role would pay in your market, before taking additional profit as a distribution — this is not optional or a minor technicality, and setting an artificially low salary specifically to dodge payroll tax is one of the more commonly flagged S-corp issues in an audit. The added burden includes running actual payroll, filing a separate business tax return, and typically higher accounting fees to manage the additional complexity — often an extra $800 to $2,000 a year in accounting and payroll costs alone. Given all of that, this is genuinely worth running your actual numbers rather than applying a rule of thumb from an online article — we can model both scenarios with your real income and tell you the honest break-even point rather than a generic recommendation.