I will add a few additional comments:
- To address your specific question, you could be correct. However, there are many factors that need to be considered, with additional questions, and this forum is not the best place to do the analysis.
- While an S corporation may save you some payroll taxes, there are a couple of factors to keep in mind:
- An S corporation should be paying out a "reasonable salary". What this is, we can't tell you at this point. The salary component, obviously is no different than what you would be paying as a sole proprietor given the same income level; you are still paying in both sides of SS, just from a different pocket.
- Also keep in mind, that all of the income earned as a sole proprietor is being reported to the SS administration. As an S corporation, only your wages get reported to the SS administration. So in the long run, upon retirement, where are you better off?
- Just to clarify a technical formality, your facts state that you are a sole proprietor, not a single-member LLC (SMLLC). So this means you would need to create a SMLLC first and then make the S election. Creating the SMLLC needs to happen at the state level. [edit - you responded as I was typing my response].
- I believe you should meet with a tax professional and discuss your long-term goals before making this decision. There are many nuances with an S corporation and the tax complexity increases. Just makes sense to understand the pros and cons before going down this path.
*A reminder that posts in a forum such as this do not constitute tax advice.
Also keep in mind the date of replies, as tax law changes.
