A US tax election that lets a business owner take part of their income as salary and part as distributions, potentially lowering self-employment tax.
An S corporation isn’t a business structure — it’s a tax election you can apply to an LLC or corporation. It lets an owner split income into a reasonable salary (subject to payroll taxes) and distributions (which aren’t subject to self-employment tax), potentially saving money once profits are high enough.
For sellers, the S-corp election can cut your tax bill, but it adds real cost and complexity: you must run payroll, pay yourself a “reasonable” salary the IRS won’t challenge, and file a separate business return. It rarely pays off until net profit is comfortably into five or six figures. For buyers, this is invisible — you’re hiring the same professional regardless of their tax setup.
The “reasonable salary” requirement is where people get into trouble; paying yourself too little to dodge taxes invites an audit. Whether an S-corp saves you anything depends on your exact numbers, so run it with a tax professional before electing — the LLC is usually the right first step.