Most business owners chose their entity type when they started — often based on what was cheapest and easiest at the time. As the business grows, that decision has a growing tax impact. The right structure at $50k in profit is rarely the right structure at $150k. Lifeline reviews your current structure, calculates what you’re actually paying in tax, and tells you specifically what a change would save.
Self-employment tax rate — what sole proprietors and single-member LLCs pay on every dollar of profit
We run the numbers for your specific revenue, expenses, and income level. You know precisely what you’d save before making any decisions.
S-Corp elections, entity changes, and retroactive elections all require specific IRS filings with specific deadlines. Lifeline manages the entire process.
Entity structure affects more than taxes. Personal liability exposure, payroll tax requirements, and TFRP risk all depend on how your business is structured. Lifeline looks at the complete picture.
Sole proprietors and single-member LLCs pay 15.3% self-employment tax on every dollar of profit. Above roughly $50k in annual profit, an S-Corp election typically pays for itself — and then some.
Changing from an LLC to an S-Corp, or from a C-Corp to an S-Corp, has specific tax consequences that must be managed carefully. Lifeline ensures the structure change doesn’t create a new tax problem while solving the old one.
Self-employment tax is 15.3% — the most overlooked cost in a small business’s tax picture. Most owners know about income tax. Fewer understand how dramatically the right entity structure reduces SE tax.
When you operate as a sole proprietor or single-member LLC, every dollar of profit is subject to self-employment tax — 15.3% on the first $160,200 of net income, then 2.9% on everything above it. That’s on top of income tax. For a business generating $120,000 in annual profit, SE tax alone is over $16,000.
The S-Corp structure changes this. By electing S-Corp status and paying yourself a “reasonable salary,” only your salary is subject to SE tax — not your total profit. The remaining profit is taken as a distribution, which is not subject to SE tax. The savings are real, specific, and calculable before you make any change.
The tradeoff: S-Corps require annual 1120-S filings, reasonable salary documentation, payroll compliance, and quarterly 941 deposits — all with their own compliance requirements. Lifeline manages the entire structure and its obligations, so the savings don’t come with unexpected new problems.
Example — S-Corp election savings
$120,000
Actual savings depend on profit level, reasonable salary determination, and state taxes. Lifeline calculates your specific number before recommending any change.
The right structure depends on your profit level, growth plans, number of owners, and how much IRS exposure you’re willing to carry personally. Here’s the honest comparison.
Sole Proprietorship
All profit flows directly to your personal return as self-employment income. Full 15.3% SE tax on every dollar of profit. No entity-level tax filing required — Schedule C on your 1040.
No separation between personal and business assets. IRS and creditors can pursue personal assets directly. No corporate shield of any kind.
Very early stage businesses or side income below ~$40k annual profit. Once profit climbs, the SE tax cost and liability exposure make other structures more appropriate.
“Disregarded entity” by default — taxed exactly like a sole proprietorship. Full SE tax on all profit. Provides liability protection but no tax advantage over a sole proprietorship without an S-Corp election.
Many LLC owners believe their structure reduces their taxes. It doesn’t — not by default. The tax advantage comes from making an S-Corp election, not from the LLC itself.
At approximately $50k+ in annual net profit, an S-Corp election through the LLC typically saves more in SE tax than it costs in additional compliance. Lifeline calculates your specific break-even point.
Profits split between reasonable salary (subject to SE tax) and distributions (not subject to SE tax). Potentially significant SE tax savings depending on profit level and salary determination.
Annual 1120-S filing, K-1s for all shareholders, reasonable salary documentation, quarterly 941 payroll deposits. More compliance — but the tax savings typically far outweigh the cost.
S-Corps require payroll — which means 941 compliance. Missing payroll deposits creates the TFRP risk. Lifeline manages payroll compliance as part of every S-Corp engagement.
Pays tax at the entity level — currently a flat 21% rate. Profits distributed as dividends are taxed again personally (double taxation). Best when the business retains most of its earnings rather than distributing them.
Businesses reinvesting profits for growth, businesses seeking outside investment, or businesses with deductible employee benefit structures that reduce the effective corporate tax rate well below 21%.
C-Corps that distribute profits to owners face double taxation — corporate tax plus personal income tax on dividends. Most small businesses are better served by pass-through structures. Lifeline models both scenarios with your specific numbers.
Most business owners review their entity structure too rarely — or never. Here are the specific triggers that signal a consultation would pay for itself.
This is not a general conversation about entity types. It’s a specific calculation built around your numbers — and a clear recommendation you can act on.
Your free consultation includes a review of your current entity structure, a calculation of what you’re paying in SE tax, and a specific recommendation on whether a change would save you money — with the exact dollar amount. No charge. No obligation.
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