#554 How To Pay Yourself As An S-Corp In 2025

In this episode of the Main Street Business Podcast, Mark J. Kohler dives into the financial benefits of transitioning to an S corp. He highlights the importance of splitting income into payroll and draws, shares his foolproof 50/50 strategy, and explains why it’s a safe and effective approach. With practical advice on avoiding IRS scrutiny and optimizing your business structure, this episode is a must-listen for entrepreneurs and small business owners. Here are some of the highlights: Mark introduces the topic of transitioning from an LLC to an S corp, emphasizing the importance of how one pays themselves. Mark splits life into operations and assets, explaining that operations could include a day job or a side hustle, while assets could include rental properties, brokerage accounts, and retirement accounts. Emphasizes the importance of treating the S corp as a real business, including having a bank account, tax ID number, corporate book, and annual board meetings. Explanation of the drawbacks of paying self-employment tax on an LLC, which is 15.3% on all profits. The importance of properly allocating draws on paper and issuing a W-2 report to achieve tax savings. How an LLC pays self-employment tax and state tax, while an S corp allows for splitting income into payroll and K-1 distributions to reduce tax liability. Implementing a payroll matrix to help business owners determine the appropriate payroll percentage based on their profit. The cost of converting to an S corp is justified by the significant tax savings achieved. Ready to Take the Next Step? Work With Mat & Mark’s Law Firm Get strategic legal guidance for your business, taxes, asset protection, and estate planning with KKOS Lawyers. [Book a Call with KKOS Lawyers] Take Control of Your Retirement Want to invest your IRA or 401(k) in assets you actually understand? Check out our self-directed trust company Directed IRA. [Learn More About Directed IRA] Free Resources Mat Sorensen’s Optimal Order of Investing Guide Learn how to prioritize where your money should go and build a smarter investing strategy. [Download the Free Guide] Mark J. Kohler’s 30-Point Tax Guide Discover practical tax strategies and planning opportunities every business owner and investor should know. [Download the Free Guide] Get More From Mat & Mark Watch on YouTube Tax strategies, business planning, investing, asset protection, and more. [Visit the YouTube Channel...