An S corp is a tax status that eligible companies can elect to reduce their tax burden. It’s often confused with an entity type—such as a sole proprietorship, LLC, C corp, or professional corporation (PC)—but it’s actually a tax classification. That means you can be an LLC and elect S corp status, or a PC and elect S corp status. The government created S corps to encourage entrepreneurship by offering tax advantages to smaller businesses, including one-employee businesses.

While you should always confirm with your tax advisor, there are four primary eligibility requirements for S corp election:

• Must be a domestic corporation or LLC
• Must have only one class of stock
• Must have 100 shareholders or fewer
• Shareholders must be U.S. citizens or residents—not corporations or partnerships

You’ll also want to make sure your annual net business income justifies the additional costs that come with S corp election. You can use the S Corp Tax Savings Calculator to see if it’s a good fit for your solopreneur venture.

Electing S corp status is an exciting time in a company’s journey. It often means that your business has reached a point of financial stability where you’re ready to optimize your taxes and save thousands of dollars each year. Those savings do come with more operational complexity, and some additional cost, including:

• Corporate-level tax prep (1120‑S + K‑1s)
• Payroll setup and ongoing fees
• State filings & franchise taxes
• Payroll taxes

You’ve put in the work. Now it’s time to get paid. Let our experts give you a detailed rundown on the hows and how-nots of Paying Yourself As A Business Owner, As A Single-Member LLC, As An S Corp, and through an Owner’s Draw–especially helpful if you run a one employee business.

We’ve broken down the steps into two parts: what to do before setting up payroll, and how to kick-start the process. You can learn all the ins and outs here—ideal for solopreneurs navigating S corp responsibilities for the first time.