LLC vs S-CORP for Side Business along with regular job

Question

Situation:
A person has a good-paying job where the Social Security tax limit is reached or almost reached every year, and the person also has a side business (LLC) that brings in more than 100k every year with the profit projected to double in the near future.
Dilemma:
Should that business be switched to an S-Corp, or should it maintain its status as LLC since the self-employment tax savings are mainly only on the Medicare part?

gaefan · Accepted Answer

I have a few LLCs.  I considered changing t o S-Corp taxation to reduce taxes but ended up not doing so.
Trump implemented tax cuts for LLCs with pass-through taxation (i.e., not S-Corp taxation).  This tax cut is close to the amount you would save with an S-Corp so there is no longer much benefit to having an S-Corp.
In sum:

LLCs with pass-through taxation have a tax break that Trump created
S-Corps allow you to reduce self-employment taxes

You can get one but not both of the above and they each save you about the same amount of tax.  There is a lot more overhead with an S-Corp so for me it was an easy decision to not do it.

Orange Coast- reinstate Monica · Answer

It might be worth it to simulate the tax scenarios for both state and federal taxes, to make your decision. Possibly you could run these scenarios yourself using tax software.
Also, you may or may not know that an LLC can file taxes as an S-corp without changing the business structure. I.e. there is no need to dissolve the LLC and incorporate, regardless of your decision.

LLC vs S-CORP for Side Business along with regular job

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