S Corporation Archives - Roger Rossmeisl, CPA

30 Aug 2025

Lower Your Self-Employment Tax Bill by Switching to an S Corporation

If you own an unincorporated small business, you may be frustrated with high self-employment (SE) tax bills. One way to lower your SE tax liability is to convert your business to an S corporation. SE tax basics Sole proprietorship income, as well as partnership income that flows through to partners (except certain limited partners), is subject to SE tax. These rules also apply to single-member LLCs that are treated as sole proprietorships for federal tax purposes and multi-member LLCs that are treated as partnerships for federal tax purposes. In 2025, the maximum federal SE tax rate of 15.3% hits the first $176,100 of net SE income. That includes 12.4% for the Social Security tax and 2.9% for the Medicare tax. Together, we’ll refer to them as federal employment taxes. The...

26 Apr 2025

Exploring Business Entities: Is an S Corporation the Right Choice?

Roger Rossmeisl, CPA

Small Business Tax Briefs

Exploring Business Entities: Is an S Corporation the Right Choice?

Are you starting a business with partners and deciding on the right entity? An S corporation might be the best choice for your new venture. One benefit of an S corporation One major advantage of an S corporation over a partnership is that shareholders aren’t personally liable for corporate debts. To ensure this protection, it’s crucial to: Adequately finance the corporation, Maintain the corporation as a separate entity, and Follow state-required formalities (for example, by filing articles of incorporation, adopting bylaws, electing a board of directors and holding organizational meetings). . Handling losses If you anticipate early losses, an S corporation is more favorable than a C corporation from a tax perspective. Shareholders in a C corporation generally don’t benefit from such losses. However, as an S corporation shareholder, you can deduct your share of losses on...

06 Aug 2023

Use an S Corporation to Mitigate Federal Employment Tax Bills

Roger Rossmeisl, CPA

Small Business Tax Briefs

Use an S Corporation to Mitigate Federal Employment Tax Bills

If you own an unincorporated small business, you probably don’t like the size of your self-employment (SE) tax bills. No wonder! For 2023, the SE tax is imposed at the painfully high rate of 15.3% on the first $160,200 of net SE income. This includes 12.4% for Social Security tax and 2.9% for Medicare tax. The $160,200 Social Security tax ceiling is up from the $147,000 ceiling for 2022, and it’s only going to get worse in future years, thanks to inflation. Above the Social Security tax ceiling, the Medicare tax component of the SE tax continues at a 2.9% rate before increasing to 3.8% at higher levels of net SE income thanks to the 0.9% additional Medicare tax, on all income. The S corp advantage For wages...

24 Apr 2023

Choosing an Entity for Your Business? How About an S Corporation?

Roger Rossmeisl, CPA

Small Business Tax Briefs

Choosing an Entity for Your Business? How About an S Corporation?

If you’re starting a business with some partners and wondering what type of entity to form, an S corporation may be the most suitable form of business for your new venture. Here are some of the reasons why. A big benefit of an S corporation over a partnership is that as S corporation shareholders, you won’t be personally liable for corporate debts. In order to receive this protection, it’s important that: The corporation be adequately financed, The existence of the corporation as a separate entity be maintained, and Various formalities required by your state be observed (for example, filing articles of incorporation, adopting by-laws, electing a board of directors and holding organizational meetings). Dealing with losses If you expect that the business will incur losses in its early years,...

28 Mar 2022

Why What an S Corp Shareholder Receives and Reports is Different

Roger Rossmeisl, CPA

Small Business Tax Briefs

Why What an S Corp Shareholder Receives and Reports is Different

You may have wondered why, in a given year, you may be taxed on more S corporation income than was distributed to you from the S corporation in which you are a shareholder. The answers lies in the way S corporations and their shareholders are taxed. But before explaining those rules, be assured you that when you are taxed on undistributed income, you won't be taxed again if and when the income ultimately is paid to you. Unlike a regular or C corporation, an S corporation generally isn't subject to income tax (California does charge a 1.5% entity-level tax). Instead, each shareholder is taxed on the corporation's earnings, whether or not the earnings are distributed. Similarly, if an S corporation has a loss, the loss is passed...

16 Jun 2021

An S Corporation Could Cut Your Self-Employment Tax

Roger Rossmeisl, CPA

Small Business Tax Briefs

An S Corporation Could Cut Your Self-Employment Tax

If your business is organized as a sole proprietorship or as a wholly owned limited liability company (LLC), you’re subject to both income tax and self-employment tax. There may be a way to cut your tax bill by conducting business as an S corporation. Fundamentals of self-employment tax The self-employment tax is imposed on 92.35% of self-employment income at a 12.4% rate for Social Security up to a certain maximum ($142,800 for 2021) and at a 2.9% rate for Medicare. No maximum tax limit applies to the Medicare tax. An additional 0.9% Medicare tax is imposed on income exceeding $250,000 for married couples ($125,000 for married persons filing separately) and $200,000 in all other cases. What if you conduct your business as a partnership in which you’re a...

05 Apr 2021

Is an S Corporation the Best Choice of Entity?

Roger Rossmeisl, CPA

Small Business Tax Briefs

Is an S Corporation the Best Choice of Entity?

Are you thinking about launching a business with some partners and wondering what type of entity to form? An S corporation may be the most suitable form of business for your new venture. Here’s an explanation of the reasons why. The biggest advantage of an S corporation over a partnership is that as S corporation shareholders, you won’t be personally liable for corporate debts. In order to receive this protection, it’s important that the corporation be adequately financed, that the existence of the corporation as a separate entity be maintained and that various formalities required by your state be observed (for example, filing articles of incorporation, adopting by-laws, electing a board of directors and holding organizational meetings). Anticipating losses If you expect that the business will incur losses...

03 May 2020

Reduce Tax with an S Corporation

Roger Rossmeisl, CPA

Small Business Tax Briefs

Do you conduct your business as a sole proprietorship or as a wholly owned limited liability company (LLC)? If so, you’re subject to both income tax and self-employment tax. There may be a way to reduce tax with an S corporation. Self-employment tax basics The self-employment tax is imposed on 92.35% of self-employment income at a 12.4% rate for Social Security up to a certain maximum ($137,700 for 2020) and at a 2.9% rate for Medicare. No maximum tax limit applies to the Medicare tax. An additional 0.9% Medicare tax is imposed on income exceeding $250,000 for married couples ($125,000 for married persons filing separately) and $200,000 in all other cases. Similarly, if you conduct your business as a partnership in which you’re a general partner, in addition...

08 Oct 2019

Should You Elect S Corporation Status?

Roger Rossmeisl, CPA

Small Business Tax Briefs

Operating a business as an S corporation may provide many advantages, including limited liability for owners and no double taxation (at least at the federal level). Self-employed people may also be able to lower their exposure to Social Security and Medicare taxes if they structure their businesses as S corps for federal tax purposes. But not all businesses are eligible — and with changes under the Tax Cuts and Jobs Act (TCJA), S corps may not be as appealing as they once were. Should you elect S corporation status? Compare and contrast The main reason why businesses elect S corp status is to obtain the limited liability of a corporation and the ability to pass corporate income, losses, deductions and credits through to shareholders. In other words,...

Lower Your Self-Employment Tax Bill by Switching to an S Corporation

Exploring Business Entities: Is an S Corporation the Right Choice?

Use an S Corporation to Mitigate Federal Employment Tax Bills

Choosing an Entity for Your Business? How About an S Corporation?

Why What an S Corp Shareholder Receives and Reports is Different

An S Corporation Could Cut Your Self-Employment Tax

Is an S Corporation the Best Choice of Entity?

Reduce Tax with an S Corporation

Should You Elect S Corporation Status?

ROGER ROSSMEISL, CPA

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