Is your business structure still working for you? Let’s find out.
The entity you chose when you started made sense then. The question is whether it still makes sense now.
Most small businesses form as sole proprietors or LLCs because they’re simple and cheap. That’s the right call at $80,000 in revenue. It may not be the right call at $180,000. The structure that minimized complexity at launch can become the structure costing you thousands in unnecessary self-employment tax every year.
What entity optimization is.
Entity optimization is revisiting the question with your actual numbers: reviewing your current legal and tax structure to determine whether a different structure would reduce your tax burden, protect your assets more effectively, or better support your growth plans.
The most common optimization is the LLC-to-S-Corp election. But the analysis also includes C-Corp evaluation for high-growth businesses, partnership structuring for multi-owner businesses, and disregarded entity cleanup.
Not a one-size-fits-all recommendation. An analysis of your specific income, ownership structure, goals, and timeline.
The LLC-to-S-Corp election explained.
This is the most common entity optimization for businesses in Breakthrough CPA’s target range.
The core mechanic: an LLC taxed as a sole proprietor pays self-employment tax on all net income, currently 15.3% up to the Social Security wage base, then 2.9% above that. An S-Corp election changes the structure so the owner pays a reasonable salary (subject to payroll taxes) and takes additional income as a distribution (not subject to self-employment tax).
The result: at sufficient income levels, the owner pays payroll taxes only on the salary portion, not on total net income.
The break-even threshold: The added compliance cost of operating as an S-Corp typically runs $2,000-$4,000 per year. S-Corp election generally makes financial sense when net income consistently exceeds $80,000-$100,000. At $150,000 in net profit, the savings typically outpace the compliance cost by a meaningful margin. At $300,000, the difference is significant.
When entity optimization makes sense.
Not sure if you’re at the threshold? These are the signals that an entity review is warranted.
Net income above $80K-$100K consistently.
Or clearly trending there.
Significant revenue growth expected.
In the next 12-24 months.
Bringing on a partner or investor.
Reconsidering ownership structure.
Planning a business sale.
Entity structure affects sale proceeds.
Structure hasn’t been reviewed since founding.
The entity that made sense at launch may not make sense now.
Paying SE tax on every dollar of net income.
As a sole proprietor or single-member LLC.
One important note: S-Corp elections have annual IRS deadlines. Form 2553 must generally be filed within 75 days of the start of the tax year or formation. Waiting until November means the savings don’t start until next year.
Not sure where you land? That’s the first thing we figure out.
What the optimization process looks like.
Entity analysis has a defined sequence.
01
Income analysis.
Current net income, projected growth, and ownership structure.
02
Entity comparison.
Tax impact of your current structure modeled against the optimized one, including additional compliance costs.
03
Recommendation.
A clear answer: elect, don’t elect, or revisit in a specific timeframe when income reaches the threshold.
04
Election filing.
If the recommendation is yes, we file IRS Form 2553 as your Florida-licensed CPA and coordinate any required state filings.
05
Ongoing compliance.
S-Corp status comes with new obligations: payroll, 1120-S filing, reasonable salary documentation. We handle all of it.
The analysis and the paperwork. Not just a recommendation you have to act on yourself.
S-Corp vs. LLC: the short version.
A starting point, not financial advice for your specific situation.
|
Self-employment tax |
All net income subject to SE tax |
Only salary subject to payroll tax |
|
Complexity |
Simple |
Moderate (payroll required) |
|
Annual compliance cost |
Low |
+$2,000-$4,000/year typically |
|
Best for |
Sub-$80K net income |
$80K-$100K+ net income |
|
Filing requirement |
Schedule C or 1065 |
Form 1120-S + K-1s |
The right answer depends on income stability, deduction profile, and business plans.
The right structure for
your numbers.
Not someone else’s.
Elections have deadlines. Miss the window and the savings wait a full year, whether your income does or not. Let’s run the analysis on your income and entity type. No commitment required.