Have a Profitable Business?

If you have a profitable sole-proprietorship or partnership, then you are paying income tax and a 14% FICA tax (a.k.a. Self-Employment tax) on all of your business profit. If you convert that business to an S Corporation, then you will continue to pay income tax on all of the business profit but will pay the 14% FICA tax only on what you pay to yourself as a W-2 wage from your S Corporation (see the next idea for further details).