Decision checklist

S-Corp Election Decision Checklist

The 18-item checklist to decide whether the S-corp election is right for your LLC — and the documentation you need to defend it.

Best for: LLC owners with $100K+ annual profit considering whether to elect S-corp status. Best printed and worked through with your CPA.

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□ Your net business profit projects above $80K–$100K this year and stable into next.
□ You can defensibly pay yourself a reasonable W-2 salary ($60K+ for most service businesses) supported by BLS data or industry surveys.
□ Your business is not categorized as a Specified Service Trade or Business (SSTB) at risk of QBI phase-out — OR you've modeled the QBI/S-corp interaction.
□ You're comfortable running payroll, filing Form 1120-S annually, and (in California) paying the 1.5% S-corp tax on distributions.

□ Calculate gross payroll-tax savings: (profit − reasonable salary) × 15.3% (SE tax not owed on the distribution portion).
□ Subtract payroll service cost (~$1,200/year for solo S-corp on Gusto or ADP).
□ Subtract additional tax prep cost for the 1120-S (~$1,500/year vs Schedule C).
□ If California: subtract state S-corp tax on the distribution (1.5% × distribution, min $800).
□ Compare the QBI impact: S-corp owners often see a smaller QBI deduction than LLC owners at the same profit level — model the delta.

□ Pull BLS Occupational Employment and Wage Statistics for your role and your geographic area (or 90th percentile for senior roles).
□ Document industry-specific salary surveys (RIA databases, vertical-specific compensation reports).
□ Write a one-page memo describing the work you actually do, the hours you spend, and the complexity / specialization required.
□ Save recruiter quotes for similar roles (if available) and competitive analysis for your specific position.
□ Set the salary at or above your documented number — not below.

□ File Form 2553 by March 15 of the year you want the election to start (or use Rev. Proc. 2013-30 late-election relief if past the deadline but still within 3 years and 75 days).
□ Confirm all shareholders sign Form 2553 — single class of stock, no foreign owners, no entity owners.
□ State conformity: confirm your state requires the federal election only (most do) vs a separate state election (some don't conform).
□ Receive IRS acceptance letter (CP261). Keep it forever.

S-Corp Election Decision Checklist — checklist content