"Should I form an S-corp?" is the question creators ask around the time they clear $60,000–80,000 in annual income. The honest answer is: probably not yet at $60k, maybe at $80k, almost certainly at $100k — and the exact number depends on your state.

Here's the full math, without the CPA jargon.

What an S-corp actually does for your taxes

When you're a sole proprietor or single-member LLC taxed as a disregarded entity, 100% of your net profit is subject to self-employment tax:

12.4% Social Security (on earnings up to $184,500 in 2026)
2.9% Medicare (on all earnings)
Total: 15.3% on 92.35% of net earnings

At $100,000 net income, SE tax is roughly $14,130.

An S-corp changes the structure: instead of all income flowing through as SE income, you pay yourself a reasonable salary — which is subject to payroll taxes (FICA) — and take the rest as S-corp distributions, which are not subject to SE tax or FICA.

The savings come from shrinking the FICA-taxable base.

The reasonable salary constraint

The IRS requires S-corp owner-employees to pay themselves a "reasonable salary" for services rendered. You can't pay yourself $1/year and take everything as distributions. The IRS has challenged and won cases where the salary was unreasonably low.

For content creators, reasonable salary benchmarks:

YouTube creator (no staff, solo production): $40,000–55,000/year
Creator with 1–2 employees or contractors: $55,000–75,000/year
Creator running a media business: $70,000–100,000/year

A common rule of thumb: salary should be 40–60% of net S-corp income at higher incomes. At $100k net, $45,000–55,000 as salary is defensible.

The math at $100k net income

As a sole proprietor:

Item	Amount
Net income	$100,000
SE tax base (× 92.35%)	$92,350
SE tax (× 15.3%)	$14,130
SE tax deduction (half)	–$7,065
Taxable income before deductions	$92,935

As an S-corp, $50,000 salary:

Item	Amount
Salary (FICA subject)	$50,000
Employee FICA (7.65%)	$3,825
Employer FICA (7.65%, deductible)	$3,825
Distribution (no FICA)	$50,000
Total FICA paid	$7,650

SE tax savings: $14,130 − $7,650 = $6,480/year.

That's real money. But now subtract the overhead:

S-corp overhead	Annual cost
Payroll service (Gusto, Rippling, etc.)	$500–1,200
Additional CPA fees for S-corp return (Form 1120-S)	$800–2,000
State annual filing fee	$0–800 (state-dependent)
Total overhead	$1,300–4,000

Net benefit at $100k: $6,480 − $2,650 (midpoint overhead) = ~$3,830/year.

Still worth it, but not "life-changing" money. You're saving ~$320/month in exchange for a significantly more complex business structure.

Break-even income by state

The break-even point — where SE tax savings first exceed overhead — varies by state because annual filing fees differ dramatically.

State	Annual LLC/S-corp fee	Break-even net income
Wyoming	$60	~$55,000
Delaware	$300	~$60,000
Texas	$0 (no state income tax)	~$55,000
Florida	$138	~$57,000
New York	$800+	~$70,000
California	$800 minimum franchise tax	~$75,000

California is the worst case: the $800 minimum franchise tax applies regardless of income, and the state also charges additional fees above certain income levels. The S-corp election rarely pencils in California below $80,000–90,000 net income.

Where the savings scale up

The savings get materially better as income rises, because you're removing a larger base from FICA. At $150k net income with a $70k salary:

	Sole proprietor	S-corp
FICA/SE tax	~$21,200	~$10,710 (on $70k salary)
Gross savings	—	~$10,490
Less overhead	—	–$2,800
Net benefit	—	~$7,690/year

At $200k, the savings reach $8,000–12,000/year range (the Social Security cap starts phasing in, limiting further benefit above $184,500 of wage income).

What the S-corp doesn't fix

A few things the S-corp election doesn't help with:

Medicare tax doesn't go away. The 2.9% Medicare portion applies to your salary. Distributions avoid SE tax but not the 0.9% Additional Medicare Tax on wages above $200,000.

It adds compliance complexity. S-corps file a separate return (Form 1120-S), require quarterly payroll filings, and must document the salary as legitimate. If you're bad at paperwork or not working with a CPA, this is a real cost.

You still need an LLC or corporation. An S-corp is a tax election on top of a legal entity — you need to form and maintain the underlying LLC or C-corp first.

S-corps have restrictions. No foreign shareholders. Only one class of stock. Maximum 100 shareholders. For a solo creator these rarely matter, but worth knowing.

How to run the numbers for your situation

The LLC vs. S-Corp calculator models your specific income, a reasonable salary, state fees for five states, and returns side-by-side take-home, SE tax savings, break-even income, and whether the election is worth it at your current income level.

The P&L simulator includes an S-corp threshold check — if your modeled net income is high enough that an election would pay off, it flags it in the output.

If you're close to the break-even threshold and want the full picture, bring the S-corp calculator output to your CPA before filing. The election can be made retroactively for the current tax year in some circumstances, and the deadline matters.