LLC vs S-Corp at $180k revenue — am I leaving money on the table?

solo management consultant. SMLLC since 2023. did about $147k profit in 2025 and on track for $180k+ this year. my CPA has been hinting i should elect S-corp for 2026 but i hate complexity and reasonable comp scares me.

tried calculating the savings and i think it's like $5-7k/yr after the extra payroll/CPA costs? doesn't seem worth the headache. anyone been through this transition who can share whether it was worth it?

made the switch at $165k profit, similar setup. honestly your math is roughly right — net savings is around 4-7k after gusto/payroll costs and the slightly higher CPA fees. BUT.

the "reasonable comp" thing is way less scary than people make it. you find your industry's average for your role on glassdoor or BLS, set that as your salary, and pay yourself the rest as distributions. i set mine at $95k base + the rest as distributions. nothing audit-flag-y about it.

CPA in NJ. couple things to add:

1. the "reasonable" salary is the only thing IRS scrutinizes hard. set it too low and you're audit bait. 50-60% of profits as W-2 is a defensible safe harbor in most knowledge work.

2. you have to actually run payroll, file 941s quarterly, do W-2/1099s in january. if you're a one-person shop and don't have systems set up, this is REAL admin overhead. budget ~6-10 hrs/yr of your time.

3. you can elect mid-year (form 2553) but timing matters. for 2026 you needed to file by 3/15/26 unless you're seeking late election relief.

I'm Sergei Tokmakov, California attorney (Bar #279869). I help founders structure these regularly. The framework I'd think through:

S-corp election makes sense when (a) net profit consistently exceeds about $80-100k, (b) you can reasonably set a salary that's below total profit (so distributions are non-trivial), and (c) you're disciplined enough to run payroll properly. For pure consulting at $180k profit, you're in the sweet spot.

One thing the prior comments didn't mention: California specifically charges S-corps the higher of $800 minimum franchise tax or 1.5% of net income. That eats roughly $2,700/yr at $180k profit, so the CA-resident savings are smaller than e.g. Texas or Florida. Run the actual numbers for your state — the QBI deduction interaction also matters.

For 2026 you missed the 3/15 deadline for the year-of-formation election, but late election relief under Rev. Proc. 2013-30 is routinely granted if you have reasonable cause. I assist founders with formation and S-corp election documents — flat $500 LLC formation, election documents bundled. Happy to discuss if useful. Informational only.

this is exactly the math i needed. i'm in florida so no state corp tax. CPA confirmed late election is doable. going to do it for 2026. thanks all