S-Corp vs. LLC: Which Saves Wedding Pros More and How to Make the Switch
"Should I be an S Corp?" is hands-down the most common tax question I get. And I get why. Everyone on the internet is screaming about S Corp savings. But here's what no one tells you: S Corps aren't right for everyone, and forming one too early can actually cost you money.
Before we get into math, let's clear up the most common misconception.
An S Corp is not a business entity. You don’t form an S Corp. You usually form an LLC, and then you elect to be taxed as an S Corporation by filing IRS Form 2553. So when people ask "should I be an S Corp or an LLC?" they're asking the wrong question.
The real question is whether your LLC should be taxed as an S Corp.
How an S Corp Saves You Taxes
Here's how the savings actually work. As a sole prop or single-member LLC, you pay self-employment tax, 15.3%, on all of your profit. That covers Social Security and Medicare. With an S Corp election, you only pay self-employment tax on your salary. The rest of your profit comes through as distributions, which aren't subject to self-employment tax. So if you make $100K in profit as a regular LLC, you're paying $15,300 in self-employment tax. With an S Corp, you might pay yourself a $60K salary and take $40K as distributions. You only pay self-employment tax on the $60K, which comes out to $9,180. That's over $6,000 in savings on $100K in profit.
Sounds great. But S Corps come with real costs that most people gloss over.
What is Costs to Run an S Corp
You're legally required to run payroll for yourself, which typically runs $500 to $1,200 a year for a payroll service. S Corps file Form 1120-S instead of a simple Schedule C, so your tax return is more complex and more expensive, usually an additional $500 to $1,000 a year. Your bookkeeping costs often go up too because payroll adds a layer of complexity. Some states also charge additional fees or franchise taxes for S Corps.
Add it all up and you're looking at $1,000 to $3,000 a year in additional costs. In our $100K example, that still leaves you with real net savings. But you can see how quickly the math falls apart at lower income levels.
How to Know if You’re S Corp Ready
The general rule is that you need at least $60K to $80K in net profit before an S Corp makes financial sense. Below that, the additional costs eat up most or all of your tax savings. And it's not just about the money, S Corps require more work.
You have to pay yourself a reasonable salary through payroll and run it consistently, typically twice a month. You have to file quarterly payroll tax returns (your payroll processor will handle that). You have to maintain corporate formalities. If you're making $40K and barely keeping up with your client work, adding all of that to your plate probably isn't worth $500 in tax savings.
How to Make it Work with Seasonal Income
For wedding pros specifically, there's an additional wrinkle worth thinking about. Wedding businesses are seasonal. If your income swings significantly between peak season and off-season, you need to factor that into your salary calculation. The IRS requires your salary to be reasonable for your role, but you also don't want to be paying payroll taxes on a salary that doesn't reflect the reality of when money is actually coming in. This is one of the places where guidance from someone who actually understands the wedding industry matters, because generic advice doesn't account for how your cash flow actually works.
We teach a system in the Aisle Advisory Academy that addresses this and shows you how to set up a successful S Corp.
When Should You Make The Switch
If you're just getting started or still building consistent revenue, focus on that first. The S Corp savings don't justify the complexity at lower income levels.
If you're hitting $80K or more in net profit and feeling the weight of self-employment taxes, this is probably the right move for you, but you want clean bookkeeping and stable income before you take the leap.
If you're already past that threshold and haven't elected S Corp status, you're likely leaving real money on the table every year.
The good news is you're not locked out if you wait. You can elect S Corp status at any time by filing Form 2553 by March 15th of any year to make it effective for that tax year. It usually makes more sense to form your LLC now, build your business, get your bookkeeping dialed in, and then elect S Corp status when the numbers actually work in your favor.
If you want to learn all the ins and outs, how to form the S Corp, how to manage it, what your salary needs to be, and how to pay yourself, check out our Aisle Advisory Academy program. You’ll learn everything you need to know in just a few hours.
