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Business Owner's Guide: S Corps for Realtors & Consultants?

Updated: Feb 17

S Corp for REaltor & Consultants

Realtors and other Professionals who operate their own businesses should take a second look at their entity type. The S Corporation is a great option because it avoids a portion of the self-employment taxes (15.3%) that filing on the Schedule C is 100% subject to!

Grow Your Business & Save on Taxes

It’s not all tax savings with S Corporations, otherwise everyone would be one. Making the election creates additional filing obligations like the need to file an entirely separate tax return for the business, Form 1120S. You will be required to pay a reasonable compensation through payroll and file all the quarterly & annual forms. A separate set of books is now required and additional bookkeeping fees may apply. With all of that to consider, at what point of net earnings does saving in self-employment taxes pay for a professional to perform these services for you? Around $35,000. This amount typically pays for your accountant, and anything you make above this amount is tax savings that you can keep in your pocket!

Quick Breakdown

A company that makes $100,000 in net business income can expect to pay $15,300 in self-employment taxes right off the top as a Schedule C before income taxes are considered. The same business that operates as a S Corporation may only pay 30-40% of that in wages which are subject to self-employment tax. That means that $60,000 - $70,000 of net income will not be subject to the tax, a savings of thousands!

Lean Overhead

Realtors & consultants typically operate with little overhead to operate their business. If they operate out of a home office they will actually get a deduction for the portion of the space used exclusively for the home office! By operating with little overhead, it lends the opportunity to make sizeable business profits even after expenses. That’s why the S corporation is often times the route that these types of Professionals choose.

Retirement Contributions

S Corporations are, also, a great was to get money into your retirement account by making contributions through the business, and through your W-2 paycheck as an employee. The business takes the contribution expense as a deduction, and the employee makes the decision if a Pre-tax, Roth, or a mixture of both is right for them.

Get Professional Help

Instead of becoming overwhelmed trying to decide how to setup your business, this is the perfect opportunity to bring in a Tax & Accounting Professional. When growth is expected year over year then the S Corporation usually makes sense at a much earlier stage even when profits in a start-up year are low. While a business who expects to maintain consistent levels that are at or below this amount may be best suited in a Schedule C. Book a Free Consultation with me today, and we will explore your options to see what’s the best fit!

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See if Rangeview Tax & Accounting is a good fit for you with a Free Discovery Chat! We offer in-person, on-site, and telephone discovery chats. On site chats are typically business with exceptions available under appropriate circumstances for individuals.

Book a Paid Consultation

Our paid consultation is $50 and puts you on the line with a tax professional who will answer questions that you have related to IRS Code, and Tax Strategies. Pay for your consultation, select one of the available appointments, and provide the general topic of discussion or questions that you wish to discuss. If you choose to move forward with our services, we will credit the consultation fee towards a future tax return preparation.

Tax Projections

Stay on top of the upcoming filing season with a tax projection! We will collect various data including current paystubs, expected business income, and more extraordinary situations like selling a home, rental, or business. From there we annualize the figures and run a mock tax return to get a good idea of an expected tax liability. This gives us a baseline in which we can further advise tax planning strategies that may apply.

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