How Much Could Switching to an S-Corp Save You This Year?
Built for licensed California contractors already running their business as a sole prop. Enter your numbers below to see your estimate in seconds.
Get your full personalized breakdown
See your suggested reasonable salary, distribution amount, and exact savings math — plus what it takes to convert. We’ll text or call to walk you through it.
| Annual net profit | $0 |
| Suggested reasonable salary (W-2) | $0 |
| Remaining owner distribution | $0 |
| Self-employment tax avoided on distribution | $0 |
| Estimated federal QBI deduction value (20% of distribution) | $0 |
| CA S-corp franchise tax (1.5% of net income, $800 min) | -$0 |
| Estimated added payroll & bookkeeping cost | -$0 |
| Your estimated net annual savings | $0 |
Why California Contractors Are Making the Switch
Lower Self-Employment Tax
As a sole prop, every dollar of profit is hit with 15.3% self-employment tax. As an S-corp, only your salary is — the rest is paid out as a distribution that skips that tax entirely.
QBI Deduction
The 20% Qualified Business Income deduction is now permanent under federal tax law. It applies to your S-corp distribution — the same split that lowers your SE tax also maximizes this deduction.
Liability Protection
A sole prop has zero separation between your personal and business assets. An S-corp creates a legal shield most contractors don’t have — and often don’t realize they’re missing.
Credibility & Bonding
Bidding as “Inc.” instead of a DBA reads as more established to GCs, lenders, and bonding companies — and makes it easier to bring on a partner or eventually sell the business.
What This Looks Like In Practice
C-10 Electrical Contractor, Riverside County. Net profit of $140,000/year as a sole prop. Reasonable salary set at $70,000, remaining $70,000 taken as a distribution.
Result: roughly $10,710 saved in self-employment tax on the distribution, plus the QBI deduction applying to that same $70,000 — before netting out California’s franchise tax and payroll costs. Run your own numbers in the calculator above to see where you land.
How It Works
Get Your Free Estimate
Use the calculator above to see your estimated annual savings in under a minute.
We Handle the Conversion
Our team files your S-corp election and gets your paperwork in order — election, EIN, and compliance.
Start Paying Yourself Smarter
Set up payroll for your reasonable salary and start taking the rest as distributions, the way the tax code intends.
Common Questions
Do I need to already be licensed?
Yes — this is built for contractors who already hold an active CSLB license and are running their business as a sole proprietor.
What if my profit is on the lower end?
S-corp savings generally start to make sense once net profit is consistently in the $60,000-$80,000+ range — below that, the added cost of payroll and compliance can outweigh the tax savings. The calculator above will show you where you land.
Is this legal? Will it trigger an audit?
S-corp election is a standard, IRS-recognized structure used by millions of small businesses, and the data suggests this is actually the lower-risk choice. IRS Data Book figures put Schedule C sole-prop audit rates at roughly 2 to 4 times higher than S-corp returns, since automated scoring flags individual returns more often than corporate ones. The key requirement is paying yourself a “reasonable salary” for the work you do — we help you set that correctly so it holds up.
What about California’s extra S-corp tax?
California charges S-corps a 1.5% franchise tax on net income (minimum $800/year), which a sole prop doesn’t pay. That cost is factored into your estimate above — for most contractors above the break-even threshold, the federal savings still outweigh it.
Not a Licensed Contractor?
We Can Still Help — Through Our Sister Company
If you’re not a licensed CA contractor, our sister company, CorpNation, handles LLC and S-corp setup for any business. Drop your info and we’ll reach out.
