#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 FirmGet 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 RetirementWant 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 ResourcesMat Sorensen’s Optimal Order of Investing GuideLearn 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 GuideDiscover practical tax strategies and planning opportunities every business owner and investor should know.[Download the Free Guide]Get More From Mat & MarkWatch on YouTubeTax strategies, business planning, investing, asset protection, and more.[Visit the YouTube Channel...