The short answer
Maybe, once your profit is steady and high enough. An S corporation lets you split profit into a salary (taxed for Social Security and Medicare) and distributions (not taxed for them). But you must pay yourself a reasonable salary, run payroll and file a separate business return, so the savings have to beat the extra cost.
Last reviewed: October 2026
How it saves money
As a sole proprietor or one-owner LLC, you pay self-employment tax (15.3%) on most of your profit. With an S corporation, you pay yourself a salary through payroll, and Social Security and Medicare tax apply only to that salary. The rest of the profit can come out as distributions without those taxes. Income tax still applies to all of it.
The catch: a reasonable salary
The IRS requires owners who work in the business to take a salary that's reasonable for the work they do. Paying yourself $0 or a token amount and taking everything as distributions is a common audit issue. See the IRS guidance on S corporation pay.
The extra costs
- Payroll every pay period, with quarterly payroll returns and year-end W-2s.
- A separate business return (Form 1120-S), due March 15 for calendar-year companies.
- More bookkeeping, and usually higher tax-prep fees.
A common rule of thumb is that it starts to make sense once profit is steadily in the range of $40,000 to $60,000 a year or more, but your numbers decide it, not the rule of thumb.
How and when to elect
- File Form 2553 with the IRS.
- To take effect for a year, it's due no more than 2 months and 15 days after the start of that tax year (March 15 for a calendar year), or any time during the year before.
- Missed it? The IRS offers late-election relief in many cases if you have a reasonable cause.
Before you elect, ask:
- Is my profit steady, or was this one good year?
- Am I ready to run payroll and keep business and personal money fully separate?
- Do I plan to sell, add partners or take on investors? (S corporations have ownership limits.)
We can run the numbers both ways for you before you decide.
Want the paperwork handled for you?
We work with CorpNet for state filings like LLC and corporation setup, EINs, S corporation elections, annual reports and dissolutions. We handle the tax side; they handle the forms.
FL Tax Experts may earn a commission if you buy through this link. It doesn't change your price.
More for business owners
- Starting a business in Florida
- Should I elect S corporation status?
- Hiring your first employee
- Closing a business
- Selling a business
Back to the Business Owner Center.
Disclaimer: This page is general information, not tax or legal advice. Every situation is different, and tax rules change. Reading this page doesn't make you a client.