Default taxation or the S-corp election? Decide on dollars, not folklore.
An LLC is a state-law choice; how it’s taxed is a separate, federal one. By default, the IRS treats a single-member LLC as a sole proprietorship and a multi-member LLC as a partnership — S-corp status isn’t an alternative to the LLC — it’s an election layered on top, and many businesses are both: a state-law LLC taxed as an S corporation. The real question is which tax treatment your numbers favor. We answer it with the same MBA-trained financial modeling used throughout this firm — your actual profit, your payroll reality, your equipment strategy, run side by side in the model — because the internet’s rules of thumb are someone else’s situation. This is a decision the firm has lived on the other side of, too — Kevin structured Hemingway CPA Inc.’s own entity and compensation setup using the same framework described here, not just recommended it to clients from the outside. The window to elect for a given year is narrow — generally two months and fifteen days after that year begins — which is why this is worth deciding early, not in December.
Kevin takes every advisory call personally, which means only so many happen each week.
What the model accounts for.
Self-Employment Tax vs. Payroll Cost
The S-corp’s headline savings against its real overhead: reasonable owner compensation, payroll filings, and the compliance you’re signing up to maintain every quarter.
Deduction Interactions
Entity choice changes how health insurance, retirement contributions, vehicle strategies, and the qualified business income deduction actually land — the analysis runs them together, not one at a time.
State & Franchise Effects
Texas franchise tax treatment and any multi-state consequences, so the federal savings aren’t quietly eaten at the state line.
Timing & Reversibility
When the election should take effect, whether a late election can rescue this year, and what unwinding it would cost if your situation changes.
Entity questions, answered.
I missed the S-corp election deadline. Is this year lost?
Often not. The IRS grants late-election relief in many cases where the business intended to elect and acted consistently with S-corp status. Whether you qualify — and whether electing retroactively is even the right move — is exactly what the analysis determines before any form is filed.
What is ‘reasonable compensation’ and why does everyone bring it up?
An S-corp owner who works in the business must be paid a reasonable W-2 wage before taking distributions — it’s the single most-audited aspect of S-corp life. Set it too low and you invite reclassification and penalties; too high and you erase the election’s benefit. We document a defensible figure based on what your role would cost to hire.
When should an existing business revisit its entity choice?
Whenever something structural changes: profit crosses a new threshold, a partner joins or leaves, you add significant equipment or real estate, or a sale is on the horizon. Entity choice isn’t a tattoo — but changes have costs, so revisits should be deliberate, not annual.
One firm, one ledger.
Engagements here are designed to feed each other. These are the ones this work most often runs alongside — and published floors and scoping drivers for all of them are on the pricing page.
The Election Is One Decision of Many
Structure sits inside a year-round plan: equipment timing, retirement, owner pay, quarterly estimates.
Tax Planning →S-Corp Means Payroll
Electing S-corp status commits you to reasonable compensation and quarterly filings. Available to bookkeeping clients.
Payroll →Filing the Structure You Chose
1120-S, 1065, or Schedule C — prepared and principal-signed.
Tax Preparation →Ready when you are. Virtual or in-office.
Every tax return prepared and signed by a licensed CPA or IRS Enrolled Agent. Documents run through the secure portal; anything you sign is sent to you electronically.
Fifteen Minutes with the Principal
Face to face by video with Kevin Hemingway, CPA. We size up what you need, whether the firm is a good fit, and what an engagement would cover — and you leave with a clear scope and next steps. This consultation is for engagement evaluation and does not include tax advice, tax planning, or detailed analysis of specific tax situations.
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