Should you switch from a Schedule C to an S Corporation? 

If you’re a small business owner filing a Schedule C, you’ve probably wondered:
“Would becoming an S Corporation actually save me money—or just make things complicated?”

Here’s the simple truth: it depends on your income and how you pay yourself.

1. Schedule C vs. S Corp—What’s the Difference?

Schedule C (Sole Proprietor)

• Report income and expenses on your personal return
• Pay 15.3% self-employment tax on all profits
• Super simple, but taxes grow fast as your income rises

S Corporation

• Your business becomes its own entity
• You pay yourself a reasonable salary (subject to payroll taxes)
• Extra profits can be taken as distributions, which aren’t taxed as self-employment income

✅ This structure can save thousands each year when done right

2. How to Know It’s Time

You might be ready to switch if:

• Your net income is $60K+ consistently
• You’re paying too much in self-employment tax
• You want to grow, hire, or look more official to banks or partners

3. Example: Sarah the Consultant

Sarah earns $120,000 a year.

• As a Schedule C, she pays about $18,000 in self-employment tax.
  
• As an S Corp, she pays herself a $60,000 salary and takes $60,000 in distributions, cutting her tax bill to about $9,000.

💰That’s roughly $9,000 saved every year.

4. Hidden Perks

• Retirement plans: S Corps can open 401(k) or SEP IRAs.
  
• Lower audit risk: Schedule C filers face higher audit rates.
  
• Cleaner books & credibility: Payroll, distributions, and filings make growth easier.

5. A Few Things to Know

You’ll have to:

• Run payroll and file payroll tax returns
  
• File a separate S Corp tax return (Form 1120-S)
  
• Pay yourself a “reasonable salary” per IRS standards

But with the right advisor, it’s simple and worth it.

Bottom Line

If your business profits are above $60K–$80K, talk to your CPA or CFO advisor.

An S Corp might not make you fancy—just financially smarter.