If you scroll through social media, you’ve probably heard this one:

“Every contractor should open an S-Corp to save on taxes!”

But here’s the truth — I’ve worked with many contractors who rushed into an S-Corp too soon and ended up spending more than they saved.

When you’re starting out, it can actually make more sense to stay as a simple LLC for the first year or two. Here’s why:

✅ Lower startup and filing costs. S-Corps mean payroll, extra forms, and higher tax-prep fees — costs that don’t always make sense early on.
✅ Use your OBBB (One Big Beautiful Bill). In your first year, you might need to buy a truck, new tools, or both. With the right write-offs, you can wipe out most of your income — so why pay for an S-Corp if your taxable income is already zero?
✅ Stay flexible while you grow. Maybe your second year is slow — staying an LLC keeps things simple and affordable until your business stabilizes.

Now, once you’re running solid projects and, after deductions, you’re netting more than $40K, that’s when it makes sense to talk about converting to an S-Corp:

 Pay yourself a reasonable salary and take distributions to save on self-employment tax.
 Protect your business and keep more of your profit in your pocket.

Bottom line — don’t follow the social-media hype. Every contractor’s journey is different. The best move is the one that fits your numbers, your growth, and your timing.

If you’re unsure when to make the switch, let’s talk — I’ll help you run the numbers and see if an S-Corp makes sense for you this year or later.