The S-Corp election, state by state.
The S-Corp election is a federal tax classification, not a different entity. Your LLC stays an LLC on the state register; what changes is how the income is taxed and what you have to run to support it. The federal half is the same everywhere. The state half is not, and it often decides the answer. Pick your state.
Four things that decide the answer.
The election is one form and a considerable amount of consequence. Whether it is worth making comes down to the split it creates, the salary it requires, the work it adds and what your state does with it.
A classification, not an entity
Electing S-Corp treatment does not convert the company. The LLC remains an LLC with the state, keeps its name and its formation record, and files the same state reports it always did. What changes is the classification the IRS applies to its income.
Salary plus distributions
Income splits into a W-2 salary and distributions. Self-employment tax applies to the salary portion and not to the distributions, which is where the saving comes from. Below a certain level of profit the saving is smaller than what the election adds in work.
Reasonable, and defensible
The salary has to reflect the work actually being done. It is the figure that gets examined, because setting it artificially low is the obvious way to overstate the distribution half. Defensible means you can explain it by reference to the role rather than to the result.
Where the states diverge
Most states accept the federal election as it stands. Some require their own state-level election, on their own form, in the first year. Others apply entity-level taxes that reduce or erase what the federal split saved. This is the half that decides the answer.
Federal form, state consequences. Run the second half before you file the first.
Pick your state.
Each state page covers how that state treats the federal election, whether it requires its own election filing and on what form, which state-level taxes still apply to an electing LLC, and what all of that does to the decision in practice.
A clean handoff, in four steps.
The election is not the first step. Getting the profit picture and the salary right comes first, because the form itself is easy and the two figures behind it are what everything else rests on.
Calculate the profit baseline
Net profit, consistently, rather than in one strong month of the year. The election earns its overhead above a level, and below that you are adding payroll and a return for very little.
Set a defensible salary
Decide what the work would pay somebody else doing it, and be able to show the reasoning. This figure carries the whole structure and it is the part most likely to be questioned.
Form 2553, and the state
The federal election goes to the IRS on Form 2553. Where your state requires its own election, that is a separate filing on that state's form, generally in the first year.
Payroll, then 1120-S
Payroll starts, with the filings that come with it, and the entity files Form 1120-S for the year. Then the decision gets revisited annually, because profit and salary both move.
The election is easy to make. Running it is the part that has to be sustainable.
The rest of Compare & choose.
Every one of these is built the same way: a national explainer above its state pages. They are the filings that sit closest to this one.
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All 51 states →The full index lives on Compare & choose.
The questions people ask before they elect.
Is an S-Corp a different kind of company?
No. It is a tax classification rather than an entity type. An LLC that elects S-Corp treatment stays an LLC on the state register, keeps the same formation record and files the same state reports. Nothing about the ownership, the name or the liability position changes. The only thing that changes is how the IRS treats the income.
How does the election save tax?
By splitting the income. Instead of the whole profit carrying self-employment tax, the owner takes a W-2 salary, which carries it, and distributions, which do not. The saving is the self-employment tax that would have applied to the distribution portion. The salary has to be reasonable for the work performed, and that is what limits how far the split can be pushed.
When is it worth electing?
Once profit is consistently high enough that the tax saved exceeds what the election adds: payroll to run, a separate entity return to file, and the professional help most owners want for both. The crossover depends on your profit, your salary and your state, which is why it is a calculation made each year rather than a fixed rule to apply once.
Do I have to file anything with my state?
It depends where you are. Most states accept the federal election automatically and want nothing further. Some require their own state-level election, on that state's form and generally in the first year, and missing it means the state taxes the company as though the election had never happened. Your state page says which of the two applies to you.
What counts as a reasonable salary?
The compensation the role would command if you paid somebody else to do the same work. There is no fixed percentage and no safe formula. What makes a figure defensible is the reasoning behind it: the duties, the hours, and what comparable work pays. It is set deliberately at the start and revisited as the business and the profit change.
Can the election be undone?
It can be revoked, and it is worth knowing that before making it, because reversing the decision is not simply a matter of stopping. The more common pattern is to revisit it annually. Profit falls, the salary requirement stops making sense, and the structure that fitted last year turns out not to fit this one.
Keep going, in order.
Compare & choose
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Open the index → IndexAll 51 state guides
Every filing a business does, organised by jurisdiction.
Open the index → ServiceCompliance calendar
Every deadline that touches your entity, watched.
Track deadlines → ServiceTalk to a specialist
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