Tax Strategy · 2024
One S-corp election, $46K a year saved
Lumen Design Studio
$46K
Annual saving
< 2 mo
Payback
Documented
Salary basis
Overview
An entity restructuring and reasonable-compensation study that cut a profitable design studio's self-employment tax without inviting risk.
The challenge
Lumen's two founders were operating as a partnership and paying self-employment tax on every dollar of a healthy six-figure profit. They'd heard an S-corp could help but had no idea what salary was defensible or whether the savings were worth the payroll hassle.
Our approach
We modeled the breakeven, filed the S-corp election, and ran a documented reasonable-compensation study so their salaries would hold up under examination. Then we set up payroll and quarterly distributions so the structure ran itself.
The outcome
The election saved roughly $46,000 in self-employment tax in its first full year, with a compensation position backed by real market data. Payroll and distributions now run on a schedule the founders barely have to think about.
