Gusto Solo: Never alone.

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.

If you work in the business, you should pay yourself a W-2 salary that’s reasonable for your role; then you can take distributions from remaining profits. This keeps you compliant and separates “pay for work” from “profit,” which lenders and advisors like to see.

Maybe. If withholding won’t cover your total bill, add estimated payments. A simple guardrail: aim to cover last year’s total tax (or about 90% of this year) through a mix of withholding and estimates—then adjust mid-year if profits jump. Form 941 reports payroll withholding; quarterly estimates cover additional tax on S corp profits passed through to you.

Have the company pay or reimburse your premiums, include that amount in W-2 Box 1, and you can often take a personal deduction if you’re eligible. Mark your calendar for year-end reporting—timing matters to keep the deduction intact.

Generally not via payroll pre-tax. Treat it as taxable pay, then take the HSA deduction on your personal return if you qualify. It’s still a strong move for high-deductible plans—just routed a bit differently for S-corp owners.

W-2 wages only. Pay yourself enough salary to hit your retirement target, then make both employee deferrals and employer contributions up to the annual limits. Review contributions late in the year so strong profits don’t go unused. Learn more here