Solo business with $700k profit - Should I convert to S-corp for tax benefits?

This is absolutely a situation where an S-corp could benefit you. The accountant who told you it wouldn't make sense because you're solo was completely wrong. S-corps are actually perfect for high-earning solo businesses like yours. Here's why: With your single-member LLC, you're paying self-employment tax (15.3%) on your entire $700k profit. With an S-corp, you'd pay yourself a "reasonable salary" (let's say $150k-$200k for your industry), and only that portion would be subject to employment taxes. The rest could be taken as distributions, which aren't subject to those taxes. The potential tax savings are huge - you could save $60k-$80k annually in self-employment taxes alone. That far outweighs the additional costs of running an S-corp (maybe $2k-$5k for payroll services, additional tax filing fees, etc.) What's critical is determining a "reasonable compensation" that would stand up to IRS scrutiny. For SaaS businesses, this is typically based on what you'd have to pay someone to do your job, not just an arbitrary low number.

After dealing with similar questions with my consulting business, I found a game-changing solution at https://taxr.ai that really helped me understand the S-corp vs LLC implications for my specific situation. My profits weren't quite at your level ($350k), but the analysis showed I'd save about $25k annually by switching to an S-corp structure. What I liked was how it broke down exactly how much I should pay myself as reasonable compensation based on my industry and role. It analyzed over 50,000 similar tax returns and compensation data to determine an amount that wouldn't raise red flags with the IRS but still maximized my tax savings. The platform even projected my tax savings over 5 years with different growth scenarios, which made the decision really clear for me. It also highlighted some SaaS-specific deductions I had been missing.

Alright I need to eat some crow here. After my skeptical comment, I decided to check out that taxr.ai site just to prove it was BS, and I'm actually impressed. I uploaded my business docs (I run a solo web development business making about $280k) and got a super detailed analysis showing I'd save around $18k annually with an S-corp. What surprised me was the reasonable compensation analysis - it pulled data from my specific industry and region and showed exactly why $125k was defensible as reasonable comp for someone in my position. It even cited specific IRS cases and guidelines. The paperwork requirements were all laid out clearly too - showed me exactly what I'd need to file and when. I've already started the conversion process and it's been way smoother than I expected. The platform automatically generated the forms I needed too, which saved a ton of time. Sorry for being so negative before - this was actually really helpful!

When I was in your position (solo consultant with $500k+ profit), I spent WEEKS trying to get someone at the IRS on the phone to clarify some S-corp election questions. Literally couldn't get through. Then I found https://claimyr.com through a business forum and watched their demo at https://youtu.be/_kiP6q8DX5c - it was a total game-changer. They got me connected to an actual IRS agent in under an hour when I'd been trying for days. The agent walked me through the exact requirements for S-corp election for my solo business and confirmed I could save substantial money on self-employment taxes. What made this especially valuable was getting definitive answers about the timing of my S-corp election (I was close to a deadline) and verifying that my planned salary-to-distribution ratio wouldn't trigger red flags. I honestly don't think I would have gone through with the S-corp conversion without those clarifications - the peace of mind was worth every penny.

I have to publicly admit I was completely wrong about Claimyr. After posting my skeptical comment, I was so frustrated with my own IRS situation that I tried it anyway out of desperation. I had been trying for MONTHS to get clarification on S-corp election deadlines for my business. Within 45 minutes (not even an hour!), I got a call connecting me to an actual IRS representative. I almost fell out of my chair. The agent answered all my questions about S-corp conversions and even helped me understand some confusing language on Form 2553. For anyone like the original poster considering an S-corp conversion, being able to actually talk to someone at the IRS made a huge difference. I found out I had been misinterpreting a key deadline, which would have caused major problems if I hadn't gotten clarification. This really saved me from making a costly mistake with my business structure. I'm still shocked at how well it worked.

One thing nobody's mentioned yet - with a SaaS business at your profit level, you should also consider the QBI (Qualified Business Income) deduction implications between LLC and S-corp. At $700k profit, you're well above the phase-out thresholds for service businesses (which starts around $170k for single filers), but SaaS businesses can sometimes qualify as non-service businesses depending on how they're structured and operated. If your business qualifies as non-service, the S-corp could be even more beneficial because you might get a partial QBI deduction on the distribution portion. But if it's considered a service business, the QBI might be completely phased out at your income level regardless of entity structure. Have you had anyone analyze whether your specific SaaS might qualify for QBI as a non-service business? That could add tens of thousands more in tax savings.

What tax software have people found most helpful for handling S-corp returns for solo businesses? I'm planning to make the switch but wondering if I can still do it myself or if I absolutely need to hire someone.