One of the most over looked tax strategies for business owners that I see time and time again is the S-Corp election.

When I connect with a business owner whose profits are $60,000 or more that’s one of the first questions I ask them…Have you considered electing to file your business as an S-Corp?

Typically the answer is “No, what’s that?”

And it’s a good question, because the way you set up your business for taxes can have a huge impact on your financial health. For a lot of business owners, filing as an S-Corp can mean saving thousands of dollars every year. That’s money you could put back into your business, use for your family, and use to support charitable organizations close to your heart.

Let’s break it down in plain English — what an S-Corp is, why you might want one, and how you actually file for it.

But before we do, here is my obligatory disclaimer that I am not a CPA or tax professional, and this is not specific tax advice. I am just a business owner like you, so I want to pass along some of what I have learned along the way.

WHAT IS AN S-CORP?

Here’s something a lot of business owners don’t realize: an S-Corporation isn’t a type of business — it’s a tax election.

That means you don’t just “open” an S-Corp. You start by forming an LLC or a corporation with your state. Then, you file IRS Form 2553 to elect S-Corp status.

Key takeaway: The S-Corp is a tax strategy layered on top of your existing business entity—not a separate legal entity.

WHY FILE AS AN S-CORP?

The biggest reason business owners file as an S-Corp is tax savings.

If you’re self-employed as a sole proprietor or LLC, all of your profits are subject to self-employment tax (Social Security and Medicare), which is currently about 15.3%.

With an S-Corp, you can split your income:

1. Salary: Pay yourself a reasonable wage and withhold payroll taxes.
2. Distributions: Any profit above your salary is taken as an owner distribution, which is not subject to self-employment tax.

💡 Example:
Your business earns $100,000 in profit.

• As a sole proprietor: You pay self-employment tax on the full $100,000.
• As an S-Corp: You pay yourself a $60,000 salary (taxed) and take $40,000 as a distribution (avoids SE tax).

That can add up to thousands of dollars in annual savings.

WHO SHOULD CONSIDER AN S-CORP?

Not every business owner should rush into an S-Corp. It’s most beneficial if:

• Your business earns consistent profits of $60,000 or more
• You can pay yourself a reasonable salary and still have profit left over
• You plan to grow and operate your business long-term

If your business is just starting or profits are inconsistent, an S-Corp may not be worth the additional paperwork and compliance requirements.

It is also a good idea to consider engaging a CPA or other tax professional when your business gets to this point, so they can help guide you on the S-Corp filing and other business tax strategies. It’s really hard to go it alone, so have someone proactive in your corner that has expertise is really crucial, as it will allow you to focus on what you know and do best, your business activities.

HOW TO FILE FOR S-CORP STATUS

Filing for S-Corp status is fairly straightforward but does require some steps:

1. Form your entity: Set up an LLC or corporation with your state.
2. File IRS Form 2553: Elect S-Corp taxation (usually within 2 months and 15 days from the start of your tax year).
3. Run payroll: Pay yourself a salary and file payroll taxes.
4. Stay compliant: File an S-Corp tax return each year (Form 1120-S).

Because of these additional steps, working with a financial professional and/or tax advisor is highly recommended.

BENEFITS OF AN S-CORP

• Reduce self-employment taxes
• Keep more profits in your business or for personal use
• Professional credibility with clients and vendors
• Structured income that allows for better financial planning

Faith + Financial Stewardship Angle

At Full of Grace Financial, money is more than just numbers — it’s about stewardship. If God has blessed you with a business, choosing an S-Corp (when it makes sense) is one way to honor that blessing. It can free up resources for growth, family, and generosity.

Final Thoughts

• An S-Corp is a tax election, not a business type.
• The main benefit is reducing self-employment taxes via salary + distributions.
• Best for businesses with consistent profits.
• Filing requires payroll and compliance, but the savings can be significant.

If you’re wondering whether an S-Corp is right for your business, we can look at your numbers together. Visit fullofgracefinancial.com to schedule a consultation and see if this tax strategy is right for you.