Form 1120-S for S-Corp elected LLCs
S-Corp filers report business income on Form 1120-S and distribute K-1s. The owner takes a W-2 salary plus distributions.
If your LLC elected S-Corp via Form 2553, you file Form 1120-S instead of Schedule C or Form 1065. The mechanics differ from default LLC taxation in three important ways.
1. You take a W-2 salary
S-Corp owners who provide services to the company must take a "reasonable salary" as W-2 wages. You run yourself through payroll (Gusto, Justworks, ADP). Federal income tax, FICA, FUTA all apply to the salary portion.
"Reasonable" is fact-specific. IRS guidance: what would you pay someone else with your skills, in your industry, in your geography, to do your job? BLS data is the typical benchmark. The IRS aggressively challenges artificially low salaries.
2. Remaining profit is distributions
Net income after your salary and other expenses is the distribution amount. Distributions are NOT subject to self-employment tax. This is the savings mechanism for S-Corp elections.
Example: $200K profit, $90K reasonable salary, $110K distribution. SE tax saved on the $110K distribution = ~$16,800/year.
3. Form 1120-S due date
March 15. Extension to September 15 via Form 7004. Late penalty: $245/shareholder/month, capped at 12 months. Plus quarterly Form 941 (payroll tax) filings.
Cost / benefit reality check
S-Corp adds payroll setup ($30-$100/month), an annual tax return ($1,500-$3,500), and complexity. Below about $40K of net profit the costs eat the savings. Above $80K of net profit, the math works clearly. Between $40K and $80K, depends on the specifics of your situation.
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