Tired of overpaying self-employment taxes or juggling unpredictable income from your business? This episode unpacks when switching from an LLC to an S Corporation makes financial sense, how to structure your income for tax efficiency, and why becoming a W-2 employee of your own company can be a game-changer for borrowing power and predictability.

Quote

“Self-employment tax is the most expensive way to be taxed on income. You want to get past it quickly.” – Aaron

Highlights

• LLC or S Corp—what’s the smarter move right now? Understand why more small business owners are choosing the S Corp structure and how it simplifies tax reporting.
• Predictable income = smarter taxes. Find out why paying yourself a consistent W-2 salary can reduce your tax burden and open doors to credit.
• When is the right time to switch to an S Corp? Aaron shares the income benchmarks that make payroll taxes cheaper than self-employment tax—and when the math flips in your favor.
• Want to qualify for a mortgage or car loan faster? Learn how being a W-2 employee of your own company can make you more attractive to lenders.
• Beyond payroll: other ways to extract cash from your business. Discover strategic uses of distributions, bonuses, and loans once your salary covers the essentials.

This episode offers a high-level strategy session for entrepreneurs managing multiple income streams. Aaron breaks down the real-world advantages of electing S Corporation status—especially when income becomes consistent and predictable. Listeners will gain insight into how W-2 payroll status can reduce tax obligations, ease the process of securing financing, and improve income tracking. The key is knowing when your business is stable enough to support regular paychecks, and when to shift surplus funds through smarter channels like owner distributions or structured loans. It’s all about using the tax code to your advantage without stepping into risky territory.

Key Concepts

• S Corporation (S Corp): A federal tax election for corporations that allows business income, losses, deductions, and credits to pass through to shareholders’ personal tax returns, avoiding double taxation.
• Form 2553: The IRS form required to elect S Corporation tax status for a C Corporation.
• Self-Employment Tax: A tax consisting of Social Security and Medicare, typically higher for business owners who are not on payroll.
• W-2 Employee: A person who receives a regular paycheck with federal tax withholdings; in this case, the business owner becomes an employee of their own S Corp.
• Owner Distributions: Non-payroll withdrawals of profits from a business, which are taxed differently than W-2 income and can be part of a smart tax strategy when managed well.

Ready to take action?

Laughlin Associates works closely with business owners to help them start, grow, and profit from their businesses while also assisting them in fulfilling their dreams. Visit LaughlinUSA.com for exclusive resources and guides to help you get started today.

You can now schedule a free consultation with the Laughlin team to discuss your specific needs!