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LLC → S-Corp conversion · End-to-end · Boutique-firm pricing
Convert your LLC to an S-Corp. Without losing the savings to the wrong reasonable comp number.
Look — the S-Corp election is the biggest single tax move most small business owners ever make. Done right, it saves $8K–$25K a year. Done wrong (and we see this every week), it triggers IRS reasonable-comp challenges, busted basis tracking, missed payroll deposits, and a "tax-free" distribution that's actually a surprise capital gain three years later. We do it end-to-end — diagnostic, Form 2553, payroll setup, accountable plan, basis tracking, ongoing compliance. Free advice either way — if the math doesn't justify converting, we tell you that on the Discovery call.
Honest fit check
When LLC → S-Corp actually saves money.
Most LLC owners don't need to convert. The ones who do, save real money. Here's the diagnostic we run.
Convert
- Net business income $50K–$75K+ (after expenses, before owner comp). Below $50K, the payroll overhead + extra return cost usually eats the savings.
- Operating business, not investment-only LLC. S-Corp works for services, retail, contractors, agencies. It does NOT work for rental real estate held directly (lose §1031, basis games hurt).
- Stable income year over year. S-Corp reasonable comp doesn't flex easily — wild income swings make payroll planning painful.
- You can pay yourself W-2 + run real payroll. Gusto, ADP, Justworks — pick one. Without payroll, the conversion is just paperwork without benefit.
- You're committed for 3+ years. S-Corp revocation is messy. Don't convert if you might dissolve or restructure within a year.
Don't convert
- Net income under $50K. Stay an SMLLC, file Schedule C. We've watched dozens of "S-corp gurus" push elections that LOSE money for the owner because the payroll overhead exceeds the SE tax savings.
- Rental real estate LLC. Hold rentals in the LLC, don't S-elect. The losses, §1031, basis, and depreciation all work better outside an S-Corp.
- Side hustle that may not last. S-Corp election commits you to running payroll. If the business goes dormant, you still need to file 1120-S annually + close payroll properly.
- Already an S-Corp via Florida/Nevada/Wyoming "anonymity" shell. The election didn't work the way the YouTube guy said it would. We see this constantly — comes with cleanup work that often costs more than the original election.
- You want passive income classification. S-Corp distributions are still active income for QBI + passive loss rules.
The actual tax math
Worked example at three income levels.
Real numbers using 2026 limits — SE tax 15.3% on first $176,100, then 2.9% Medicare. Reasonable comp set at the IRS-defensible midpoint. QBI factored in. All figures pre-state-tax.
$100,000 net
Schedule C (no S-Corp)
- SE tax: $14,130
- Federal income tax (single, std ded): ~$12,500
- Total federal: $26,630
With S-Corp ($55K comp / $45K distribution)
- Payroll tax (employer + employee): $8,415
- Federal income tax: ~$11,000 (with QBI on distribution)
- Total federal: $19,415
Annual savings: ~$7,215
After ~$1,800 payroll service + extra return prep: ~$5,400 net
$200,000 net
Schedule C (no S-Corp)
- SE tax: $23,675
- Federal income tax: ~$36,500
- Total federal: $60,175
With S-Corp ($90K comp / $110K distribution)
- Payroll tax: $13,770
- Federal income tax: ~$32,800 (with QBI)
- Total federal: $46,570
Annual savings: ~$13,605
After payroll + return prep: ~$11,500 net
$400,000 net
Schedule C (no S-Corp)
- SE tax: $33,170 (capped above $176,100)
- Federal income tax: ~$103,000
- Total federal: $136,170
With S-Corp ($150K comp / $250K distribution)
- Payroll tax: $22,950
- Federal income tax: ~$95,800 (with QBI phase-out)
- Total federal: $118,750
Annual savings: ~$17,420
After payroll + return prep: ~$15,200 net
Just so you know — these numbers are simplified. Your real savings depend on state tax, your reasonable comp range (IRS-defensible, not arbitrary), your existing retirement contributions, your spouse's income, and whether you have other QBI businesses in play. The Tax Analysis gives you the real number, not a rough estimate.
How we actually run a conversion
Five steps. End-to-end.
Most preparers do step 2 and call it done. We do all five — that's why the math actually works out the way the calculator says it will.
- 01
Diagnostic + conversion plan
We run your last three returns through the Tax Analysis (paid). Output: a written plan with your specific break-even, your IRS-defensible reasonable comp range, the optimal effective date, and the year-one tax savings estimate. If the math says don't convert, we tell you that and recommend the next-best move. Free advice either way.
- 02
Form 2553 filing (or late-election relief)
If you're within the 75-day window or filing for next tax year, straight Form 2553. If you missed the window, we file under Rev. Proc. 2013-30 for relief — works in ~95% of cases when properly documented. We handle the entity-level election plus the state-level conformity filing where required (TX is automatic; CA, NY require separate elections).
- 03
Payroll setup + reasonable comp documentation
We get you onto Gusto (our preferred — built for S-Corps) with the right pay frequency, the right W-2 setup for 2% shareholders, and the right tax-withholding schedule. We document your reasonable comp methodology (RCReports, BLS data, or peer benchmarking) so it's audit-defensible from day one.
- 04
Accountable plan + basis tracking initialization
We draft your accountable plan so you can reimburse yourself for home office, vehicle, phone, and travel tax-free. We initialize your shareholder basis tracking spreadsheet (or Form 7203 work papers) so distributions get treated correctly forever. Most preparers skip this — it's the #1 reason distributions get reclassified as wages or capital gains at audit.
- 05
Ongoing compliance + year-end planning
Form 1120-S filed annually. Quarterly tax planning calibrated to actual income. Reasonable comp reviewed annually (the IRS doesn't expect a flat number — it expects justification for any changes). Basis updated at year-end. State franchise/PTET elections evaluated if applicable. This is the part that keeps the savings real year after year, not just year one.
What changes after you convert
Just so you know — this is real work, not a checkbox.
Anyone who tells you S-Corp is set-and-forget hasn't done it. Here's what actually changes in your life.
- You pay yourself on payroll, every period. Bi-weekly is common. The IRS expects regular, documented owner comp — not a single December check.
- Federal payroll deposits hit due dates. Late deposits = penalties. Gusto automates this if you're set up correctly.
- Quarterly estimates change. Less Schedule SE, more Form 1040 estimated payments on the distribution income. We recalibrate at every quarterly check-in.
- You file two returns, not one. Form 1120-S in March (or extended to September), then Form 1040 in April. Both are part of the engagement.
- Basis tracking matters forever. Distributions in excess of basis become capital gains. Suspended losses can't be claimed without sufficient basis. Form 7203 is mandatory since 2021.
- Distributions must be proportional to ownership. One-class-of-stock rule. If you have a partner and you take a draw they don't, you can void the election. We police this carefully on multi-owner S-Corps.
- Health insurance flows through a specific way. 2%-shareholder rule: premiums add back to W-2 Box 1, deduct above-the-line on the 1040. Done wrong, you lose the deduction OR trigger payroll-tax adjustments.
- Retirement contributions are way bigger. Solo 401(k) on S-Corp lets you stack $24,500 employee + 25% employer profit-sharing on W-2 wages — up to $72,000 combined in 2026. Schedule C is capped at SEP-IRA's 20% of net.
Honest about what goes wrong
Five mistakes we see every single week.
From the cleanup engagements we run on people who DIY'd it or used the wrong preparer.
- Reasonable comp set too low. "I'll pay myself $20K and distribute $180K — saves a fortune!" Yeah, until the IRS reclassifies the distributions as wages and you owe back payroll tax + penalties + interest. We've seen $40K+ adjustments on single-year audits.
- No payroll actually running. Owner takes "draws" all year, calls them distributions at year-end. The IRS calls them wages and assesses the payroll tax anyway. Plus you've missed the Solo 401(k) opportunity entirely.
- Distributions in excess of basis. Cash came in, owner pulled it out, never tracked basis. Three years later the K-1 line shows distributions exceeding basis — surprise capital gain, sometimes $50K+, on tax that should have been zero.
- Form 7203 missing or wrong. Mandatory since 2021. Most DIY S-Corp filers don't even know it exists. Missing 7203 + losses claimed = preparer-side §6695 penalty risk + client-side disallowance.
- Late S-elections done wrong. Rev. Proc. 2013-30 relief works when documented correctly. We see filings without the required reasonable-cause statement, without the operating-as-S-Corp attestation, without proper effective dates — the IRS denies them and the owner is stuck filing as the wrong entity for years.
Verified Google reviews
Clients we've done S-Corp work for. Verbatim.
Pulled directly from Google. Names as Google displays them.
I hired Elevated Tax Strategies when I needed my tax returns fast — and they nailed it, delivering well before the ETA. Their process was super organized and easy to follow, turning a mountain of paperwork into simple, manageable steps.
I'm a small business owner who has several businesses but knows little about taxes. This can be a scary position. Elevated Tax Strategies took the time to educate me and walk me through every step. A trusted partner for small business owners.
Transparent pricing
No "request a quote." Here's what it costs.
Same pricing on the website as on the call. We tell you the number on Discovery — if we can't, we say why and quote within 24 hours.
Step 1 · Diagnostic
Tax Analysis
$2,500
60–90 min deep-dive on your last 3 returns + your situation. Output: written conversion plan with break-even math, reasonable comp range, Form 2553 strategy, and year-one savings estimate. Fee credits to your engagement if you proceed.
Step 2 · Full conversion + Year 1
Comprehensive tier
$8,000–$15,000
Form 2553 filing, payroll setup, accountable plan, basis tracking init, Form 1120-S + Form 1040 returns, quarterly check-ins, year-end planning. Priced by complexity (single-state vs multi-state, single-owner vs multi-owner).
Ongoing · Year 2+
Annual retainer
$6,000–$12,000/yr
Annual 1120-S + 1040, quarterly tax planning, reasonable comp review, basis updates, year-end optimization. State PTET elections evaluated annually if applicable.
Risk reversal
Three things we promise before you book.
01
We tell you if the math doesn't work
If your numbers don't support conversion, we say so on the Discovery — before you pay for the Analysis. We'd rather lose a $2,500 fee than put you in an election that costs you money.
02
The Tax Analysis fee credits to the engagement
If you proceed with the conversion, the $2,500 Analysis fee is credited against your Comprehensive tier engagement. So you pay for the diagnostic OR the engagement — not both.
03
Same person, every call
The person you talked to on Discovery is the person who runs your Analysis, files your Form 2553, and picks up the phone in March. No associate hand-off. No "let me check with the partner." Boutique by design.
Next step
If LLC → S-Corp might be your move, let's look at the actual math.
15 minutes on Google Meet. Real conversation. By the end you'll know whether converting saves you real money — and what the engagement looks like if you decide to do it. Free advice either way.
Book the 15-min Discovery →