THIS WEEK'S STORY
The $600 Truth About S-Corps
Carlos slid his phone across the table before he even sat down.
“Watch this.”
It was a thirty-second video. Some guy in a rented office telling him an S-corp would save him thousands. Carlos runs a foundation and concrete outfit down the Peninsula. Solid business. And he wanted to know why I hadn’t already set one up for him.
So I turned the phone face-down and asked him one thing. “What was your net profit last year?”
Quiet. He knew his revenue cold. The profit, he had to guess.
That’s the whole problem in one moment. The video sells the savings. It never mentions the math.
Here’s what that guy left out. An S-corp is just a tax choice — you keep your LLC, your crew, your customers, all of it. You split your money into a salary and a distribution, and you skip Social Security and Medicare tax on the distribution. Real savings. I’m not going to pretend otherwise.
But it costs money to run. Payroll. A second tax return. Tighter books. And in California the S-corp pays its own tax — one and a half percent (1.5%) of net income, with an eight hundred dollar ($800) floor. Your salary stops counting toward the QBI deduction too. Nobody in a thirty-second video is telling you that.
I ran Carlos’s real numbers. At his profit, after every added cost, the election saved him about six hundred dollars ($600). Not thousands. And because he’s on the jobsite every day, he can’t pay himself twenty thousand dollars ($20,000) and pull the rest as distributions. The IRS knows what a working owner earns.
Some owners, it’s a clean win. Others, it’s a headache dressed up as a strategy.
