Should I Become an S-Corp? (2026 Self-Check Tool)

If your business is earning meaningful profit, an S-Corp election may be worth exploring. This quick self-check screens for the two biggest factors: net profit (after expenses) and whether that profit level is likely to continue next year—plus whether you’re open to the payroll/compliance an S-Corp requires. Educational only, current as of January 19, 2026.

Who it’s for:

  • Single-owner LLCs and sole proprietors

  • Service businesses and consultants

  • Owners considering S-Corp election to potentially reduce self-employment tax (where appropriate)

How to use it:

  1. Choose your estimated annual net profit (after expenses)

  2. Indicate whether you expect $45k+ net profit next year

  3. Confirm you’re open to payroll + added compliance if it makes financial sense

Next step:
If your result says “Worth exploring”, book an S-Corp analysis and we’ll run the numbers using your actual profit, a reasonable salary approach, and expected payroll/compliance costs!

Serving clients nationwide, with a focus on tax planning for individuals and small business owners in the Minneapolis–St. Paul area.

Should I elect S-Corp status?

Answer 3 questions to see whether an S-Corp election is worth exploring. Educational only (not tax/legal advice). Current as of Jan 19, 2026.

1) Estimated annual business net profit (after expenses)
2) Do you reasonably expect your business to be at or above $45k net profit on an ongoing basis over the next year?
3) If it makes financial sense, are you open to payroll + extra compliance?

S-Corps generally require paying a “reasonable salary” and running payroll.

Your result

Answer all 3 questions

Select one option in each section to see your result.

After your result appears, the next step is an S-Corp analysis where we run your actual numbers (including a reasonable salary approach and expected payroll/compliance costs) to estimate potential savings.

Run the numbers with me
Legal & tax disclaimers

This self-check provides general educational information only and does not constitute tax, legal, or accounting advice. It does not create a client relationship. Results are generalized screens and may not apply to your facts. Do not act on this output without consulting a qualified professional. Whether an S-Corp election is appropriate depends on your specific situation, “reasonable compensation,” payroll/compliance costs, and current tax law and guidance. This page reflects general considerations as of January 19, 2026.

FAQs

Q: What is an S-Corp election?
An S-Corp election is a tax classification (not a separate type of company by itself) that can change how business income is treated for tax purposes. Many owners keep their LLC but elect to have it taxed as an S-Corp.

Q: When does an S-Corp usually make sense?
A common starting point is when a business has consistent net profit and expects that profit to continue. In many cases, once a business is consistently above a certain profit range, it’s worth running a CPA-level analysis to see if the added payroll and compliance are justified.

Q: Why does net profit matter more than revenue?
Because S-Corp planning is typically driven by what’s left after expenses. Two businesses can have the same revenue but very different net profit, and net profit is what usually determines whether there’s room for savings after paying a reasonable salary and costs.

Q: What is “reasonable compensation”?
If you’re an owner who works in the business, S-Corp rules generally require you to pay yourself a reasonable wage for the work you perform. What’s “reasonable” depends on role, hours, industry, and other facts.

Q: Do S-Corps always save money?
No. While an S-Corp can reduce self-employment tax on a portion of profit in certain situations, payroll, tax filings, and administrative costs can offset some or all of the benefit. That’s why an analysis based on your real numbers is important.

Q: What extra work does an S-Corp add?
Typically: running payroll, additional tax filings, bookkeeping discipline, and staying consistent about salary vs. distributions. The exact requirements depend on your situation and setup.

Q: Is this tool tax advice?
No. It’s an educational screen to help you decide whether it’s worth having the conversation and running numbers with a professional. Final recommendations depend on your documents, goals, and current law.

Q: What should I do if I’m under the profit threshold right now?
Focus on clean bookkeeping, capturing legitimate deductions, and building consistent profitability. If your profit rises and stabilizes, re-run the tool and consider an S-Corp analysis at that point.