Corp Transition

Question

tructuring the Business: S-Corp Transition

Many successful nail salon owners start as Sole Proprietorships or single-member LLCs. However, once net profits cross approximately $50,000 to $60,000 a year, it is highly beneficial to look into electing S-Corporation status.

Under an S-Corp, the owner can split their income into a "reasonable salary" (subject to self-employment tax) and "shareholder distributions" (exempt from self-employment tax), potentially saving thousands of dollars in FICA taxes annually.