Starting off such a comparison is like comparing apples to oranges.
A PLLC, or an LLC, is how your business is formed with the state. An S-Corporation election is made on the Federal level for taxation purposes.
So, if you are already a PLLC or LLC, continue on. If not, our PLLC vs. LLC post will help you identify what decision is best for you.
We’re always asked questions about companies that wish to become S-Corporations in an attempt to save on taxes.In response, the first thing I discuss with clients is if becoming an S-Corporation is going to save them more money than it costs to become an S-Corp.
Until now, you’re most likely a sole proprietor. You file your business on your personal tax return and you (hopefully) pay estimated taxes.
That changes when you make the election to be an S-Corporation. You need to file a separate tax return for the business and you will need to start paying yourself a salary. Both of these usually cost money to do. For S-Corporation clients, we estimate that the tax return and payroll are going to run you around $1,350 a year. This is in addition to the costs of making the election and getting payroll set up, which is estimated to be around $500.
Now that we have an estimate on the additional costs it will take to operate an S-Corp, are you going to save enough?
If your net income before you pay yourself is around $50,000 or higher, it is more than likely worth the additional hassle of making the S-Corp election. There are additional factors as well, such as do you work in a home office, how are you getting your health insurance, and so forth.
Of course, choosing to become an S-Corp is based on your unique situation and does depend on your industry.
TL;DR: Set up an appointment with us if you are thinking about making the S-Corporation election.