S-Corp Election

S-Corp Election — Save on Self-Employment Taxes

An S-Corporation election allows your LLC or corporation to be taxed as an S-Corp, potentially saving significant amounts in self-employment taxes. Instead of paying SE tax on all business profits, owner-employees pay themselves a reasonable salary (subject to payroll taxes), while remaining profits are distributed without SE tax.

The S-Corp election is made by filing IRS Form 2553 — and timing is critical. For the election to be effective for the current tax year, it must be filed within the first 2 months and 15 days of the tax year. USBase ensures your election is filed correctly and on time.

How S-Corp Election Works

• File IRS Form 2553 (Election by a Small Business Corporation)
• Must meet IRS eligibility requirements (e.g., max 100 shareholders, one class of stock)
• Owner-employees pay themselves a reasonable salary
• Remaining profit distributed as a dividend (no SE tax)
• Significant SE tax savings for profitable businesses

S-Corp Eligibility Requirements

• Must be a domestic corporation or LLC
• No more than 100 shareholders/members
• All shareholders must be U.S. citizens or resident aliens
• Only one class of stock is permitted
• Cannot be a bank, insurance company, or certain DISC

How Much Can You Save?

The self-employment tax rate is 15.3% on the first ,200 of net earnings (2023). By electing S-Corp status and paying yourself a reasonable salary, you can distribute remaining profits without that 15.3% tax. For a business earning ,000+ annually, this can mean ,000–,000+ in annual tax savings. USBase will help you determine if S-Corp election makes sense for your situation.