If you are an established sole-proprietorship or single-member LLC, there may a compelling reason to consider becoming an S-Corp. In many instances, when you have reached a net profit of $100,000 (after expenses, but not including owner draws), you can save thousands of tax dollars per year by electing to become an S-Corp. If you're interested in pursuing this tax strategy this year, you need to make the election by March 15.
Here's an example of how it can work.
Case Study: Consultant earned $135,000 gross revenue. Our client asked us to "show him the money." After expenses, the tax treatment results are as follows.
As you can see, this client saved over $6,000 in tax. Even after the hidden costs (extra tax return, State fees, additional accounting), he could clearly justify making the switch to S-Corporation taxation.