Over 90% of business owners are paying more taxes than they should. Shocking? Absolutely. But here’s the truth—most entrepreneurs pick the wrong business structure when they start out. And that one simple mistake could be costing them $10,000, $20,000 or more in unnecessary taxes every single year.
If you’re a small business owner, freelancer, or self-employed professional, this blog post could save you a lot of money. We’ll walk you through LLCs, S Corps, and C Corps, and show you which one can unlock massive tax savings for your business.
Why Business Structure Matters More Than You Think
When you first started your business, tax strategy probably wasn’t on your radar. You might’ve just gone with an LLC because everyone said it was the “safe” choice. Fast forward a few years, and now your business is growing—but your tax bill is growing faster.
Choosing the right business entity isn’t just a legal decision—it’s one of the most important financial decisions you’ll ever make. And unfortunately, many accountants and CPAs don’t bring this up unless you ask.
Let’s Break It Down: LLC vs S Corp vs C Corp
✅ LLCs – Simple, But Can Be Costly
An LLC (Limited Liability Company) is the most common starting point. It’s easy to form, protects your personal assets, and gives you flexibility in how you’re taxed.
The problem? By default, LLCs are taxed as sole proprietors. That means you’re paying 15.3% in self-employment tax on 100% of your profits—plus regular income tax. Ouch.
If you’re making $100,000 in profit, that’s $15,300 in self-employment taxes alone.
👉 Best for: Startups or businesses making under $50,000 in annual profit
🚫 Watch out for: High self-employment tax
✅ S Corps – The Tax-Saving Sweet Spot
Once you’re making consistent profits over $50,000 per year, it might be time to switch to an S Corporation (S Corp).
S Corps let you split your income between a reasonable salary (subject to payroll taxes) and distributions (which are not). This simple change can save you thousands in self-employment tax every year.
Example:
- Profit: $100,000
- Reasonable salary: $50,000
- Distributions: $50,000
- Tax savings: ~$7,500 – $10,000+
👉 Best for: Growing small businesses making $50K–$500K in profits
🚫 Watch out for: Payroll setup, IRS salary requirements, and shareholder restrictions
✅ C Corps – Smart for High-Profit Businesses
C Corporations are often seen as the “big business” structure—but they can be a powerful tax strategy tool if used right.
The flat 21% corporate tax rate can be lower than many individual tax rates. And if you plan to reinvest profits back into your business, a C Corp could help you keep more money inside the company.
But there’s a catch: C Corps are subject to double taxation. First, the corporation pays taxes. Then you’re taxed again on any dividends.
👉 Best for: Businesses making high 6 or 7 figures that reinvest most profits
🚫 Watch out for: Double taxation and more administrative work
Real Numbers: How Much Are You Losing?
Let’s put it into perspective. Here’s how much you could be overpaying in taxes each year if you’re not structured correctly:
- LLC: Overpaying $10,000–$20,000 in self-employment tax
- S Corp (not optimized): Overpaying $5,000–$15,000 by not setting salary/distributions correctly
- C Corp (wrong use): Overpaying $20,000+ due to double taxation
And remember—this isn’t a one-time mistake. It adds up every single year. Over 10 years, that’s six figures in lost wealth.
When Should You Change Business Structures?
Here’s a quick cheat sheet:
| Business Profit | Recommended Structure |
|---|---|
| $0 – $50,000 | LLC (default or sole prop) |
| $50,000 – $500,000 | S Corporation |
| $500,000+ | Consider a C Corporation (if reinvesting profits) |
Still not sure? That’s where a tax strategist can help.
Take Action: Don’t Let the IRS Take More Than They Should
Here’s the hard truth—every day you delay switching to the right structure, you’re losing money. That’s money you could invest in your business, buy an investment property, or fund your retirement.
Here’s what you should do next:
- Get a Business Structure Review – Find out if your current entity is costing you thousands per year.
- Download the Book – Get Your Biggest Expense and learn how to legally pay less in taxes.
- Talk to a Pro – This isn’t DIY stuff. Work with a qualified accountant or tax strategist to restructure the right way.
Final Thoughts
Most business owners don’t need to work harder to make more—they just need to stop giving so much of their money to the IRS. The wealthy play offense when it comes to taxes. You can too.
Remember, it’s not about how much you make—it’s about how much you keep.
Ready to Keep More of What You Earn?
Tax credits aren’t just for the “big guys.” They’re for entrepreneurs like you who are working hard to grow their businesses. The wealthy don’t just make money—they keep more of it by playing the tax game strategically. Now you know how to do the same.
Want to dive deeper? Check out Tiffany’s book, Your Biggest Expense: How to Legally Pay Less in Taxes to Keep More Wealth, for a step-by-step guide to claiming every credit you qualify for and structuring your business to minimize taxes year after year. Grab your copy at yourbiggestexpense.com and start keeping more of what you earn today.
Because when it comes to your business, it’s not about how much you make—it’s about how much you keep.
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