If you file taxes as a corporation you can pay out dividends which are exempt from self-employment tax, but the IRS says you must pay yourself a salary. A big audit flag is paying yourself a nominal salary and the rest in dividends. If you are making six figures there might be a tax advantage after you factor in the other associated costs, but otherwise you should probably forget about incorporating if you are only interested in saving on taxes.
how much would be considered an "acceptable salary"? what about savings on tax deductions for your business?
There is no clearly defined "acceptable salary" but it should be what it would cost if you hired someone to do all the work you do. If you pay yourself $10K a year and have $50K in dividends, you are probably asking for an audit. You still pay income taxes on dividends, but you don't pay SS tax on them. The IRS is wise to small corps that try to avoid paying SS. You will also have a lot more record keeping and need to have a corporate bank account to keep the money separate from your personal funds. California is very aggressive in making sure you pay them $800 a year (minimum) even if you don't make a penny. You can take business deductions even if you are filing as an individual. If you have net profit of $100K or more a year, you should really be seeing a CPA for specific advice for your situation and if an S-corp or LLC makes sense.
I have both an LLC and an c-corp, the LLC is simple, the s-corp is a pain in the ass! You will need a bookkeeper if you do an s-corp and a tax accountant, whereas with an LLC you can handle it yourself. With an s-corp you have to pay yourself a salary which has many paperwork requirements and things that have to be filed every quarter, it requires a separate tax return. Long story short form an LLC, I doubt you need an s-corp, unless you want to sell stock and gain some tax benefits that it will offer.
no you don't, if you own 100% of the LLC, meaning you are the only member, all profits are reported on a schedule c with your 1040 tax return at the end of the year. LLC's are quite simple from a bookkeeping, accounting and tax standpoint, s-corps are not, luckily my wife is an accountant and handles all of it for me.
oh, and if you don't believe me go talk to an accountant they can tell you how much more complicated an s-corp is.