I have seen many articles on the Internet which state that you absolutely need to form a limited liability company (LLC) if you are a small business owner. The S corporation, once the darling of small business entities, is probably feeling a little lonely these days.
One important aspect of the S corporation is that you may be able to save on self-employment taxes by using an S corp instead of an LLC.
But don’t get too carried away in the belief that you can set a low salary says accountant Joe Kristan in his latest post on Iowa Biz regarding s corporation salaries. The key is to set a "reasonable salary" if you are the owner, although admittedly no one really knows what that means.
As is often the case in dealing with tax issues, Joe’s advice is to remember that "pigs get fat, but hogs get slaughtered." It’s definitely a good idea to talk with an accountant when setting your salary in your S corporation. It could save you considerable time and expense in dealing with the IRS.