S-Corporation & Entity Tax Strategy.
S-Corporation & Entity Tax Strategy is a high-impact consultative advisory service designed to legally reduce self-employment taxes, protect corporate veil integrity, and maximize pass-through profits. For business owners and sole proprietors with net operating income exceeding $50,000, Alan Balmer, CPA models the exact salary-to-distribution split, establishes institutional-grade reasonable compensation documentation under IRS Section 162 standards, and coordinates late-election relief (Form 2553). The outcome is thousands of dollars in permanent annual payroll tax savings and an airtight defense against IRS compensation audits.
Critical Decision Triggers: When You Need Counsel.
Operating without proactive strategy risks unnecessary taxes, penalties, and audit friction. These are the specific turning points when engaging senior counsel changes your financial outcome.
Net Schedule C or LLC Income Exceeds $50,000
You are operating as a sole proprietor or single-member LLC, paying a crushing 15.3% self-employment tax (Social Security and Medicare) on 100% of your net profits.
Arbitrary Salary-to-Distribution Splits
You already elected S-Corp status, but your prior accountant picked an arbitrary round salary (e.g., $50,000 or 50/50 split) without formal wage justification, leaving you vulnerable to IRS audits.
Missed the March 15 S-Corp Election Deadline
You realized you need S-Corporation status for the current tax year, but missed the standard 75-day Form 2553 filing window.
Entity Selection Paralyzing Growth
You are starting a venture or expanding existing operations and need clarity on LLC vs. S-Corp vs. C-Corp vs. Holding Company architectures.
Shareholder Basis & Distribution Confusion
You took cash out of your business without knowing if you had sufficient tax basis, risking reclassification as taxable capital gains.
Real-World Case Precedents
A Dallas consulting agency operating as a single-member LLC generated $180,000 in net profit. As a sole proprietor, the founder paid $24,200 in self-employment taxes alone. Alan engineered an S-Corporation conversion, modeled a defensible $80,000 reasonable salary backed by multi-source wage data, and distributed the remaining $100,000 as S-Corp dividends. The structural shift permanently eliminated over $14,100 in annual payroll taxes while establishing bulletproof audit defense.
A medical marketing company in Southlake generated $260,000 in net earnings. Their bookkeeper neglected to file Form 2553 by March 15, threatening to subject the entire profit to full self-employment tax. Alan drafted and submitted a retroactive late S-Corporation election package under Revenue Procedure 2013-30 with substantiated reasonable cause statements. The IRS granted full retroactive approval back to January 1, saving the business $19,500 in taxes.
Texas & Multi-State Jurisdictional Scope
Tax outcomes depend not just on federal codes, but on how state statutes, residency tests, and cross-border apportionment rules intersect. Alan Balmer, CPA leverages decades of nationwide practice to construct defensive, multi-jurisdiction frameworks.
The Texas Franchise Tax "No Tax Due" Threshold
Texas has no corporate income tax. In Texas, S-Corporations are subject to the Texas Franchise Tax, but entities with total annualized revenue below the state threshold ($2.47M for recent biennia) owe zero franchise tax while filing simplified information reports.
Multi-State S-Corp Apportionment
If your S-Corporation has clients, remote contractors, or operations in states with personal income taxes, those states require non-resident shareholder composite returns or pass-through entity tax (PTET) elections. Alan designs state apportionment models to minimize out-of-state tax leakage.
Protecting Corporate Veil Integrity
Under Texas Business Organizations Code (BOC), maintaining corporate liability protection requires strict separation of personal and business funds, formal shareholder compensation, and documented annual corporate minutes.
Decisions & Tradeoffs: Strategic Reality.
Every tax decision involves tradeoffs between cash liquidity, audit exposure, compliance complexity, and permanent tax savings.
| Entity Parameter | Sole Proprietorship / Default LLC | Optimized S-Corporation Architecture |
|---|---|---|
| Self-Employment Tax (FICA) | Paid on 100% of net income (15.3% up to cap, 2.9% thereafter, plus 0.9% Medicare surtax). | ✓ Paid ONLY on reasonable W-2 salary; remaining profits distributed free of SE tax. |
| Reasonable Compensation Defense | Not applicable (all earnings taxed as self-employment income). | ✓ Defensible multi-factor wage report documented under IRC § 162. |
| Section 199A QBI Deduction | Limited to net business profit after self-employment tax deductions. | ✓ Balanced to optimize 20% QBI deduction alongside W-2 wage limitations. |
| Audit Vulnerability | Schedule C filers face higher IRS audit rates per IRS data books. | ✓ Corporate Form 1120-S audit rates are historically much lower than Schedule C. |
| Corporate Formalities Required | Minimal (commingling funds remains the primary liability risk). | ✓ Requires compliant payroll processing, quarterly filings, and corporate minutes. |
Who This Is For. And Who It Is Not For.
We maintain absolute alignment with our clients. Selective engagements ensure maximum focus, strategic depth, and high-value results.
Ideal Fit Criteria
- ✦ Profitable LLC owners, consultants, contractors, and agencies with net income over $50,000.
- ✦ Active business owners seeking to lower self-employment taxes legally through distribution splits.
- ✦ Business owners facing an IRS audit or penalty notice regarding shareholder compensation.
- ✦ Founders needing retroactive late-election relief for missed Form 2553 deadlines.
Who This Is Not For
- — Passive investment holdings or buy-and-hold rental properties (which belong in LLCs/partnerships, never S-Corps due to basis and distribution traps).
- — Businesses with net income below $40,000 (where payroll compliance overhead offsets tax savings).
- — Companies planning to issue multiple classes of stock or raise venture capital requiring C-Corp equity.
What Alan Balmer Delivers.
When you retain Alan Balmer, PC for S-Corporation and Entity Tax Strategy, you receive:
Reasonable Compensation Analysis & Defense Dossier
A comprehensive, audit-ready wage report establishing your defensible salary across multi-factor criteria (duties, time, industry salary benchmarks, geographic data).
Form 2553 Federal S-Election Package
Precision preparation and submission of your federal S-Corporation election, including late-election relief petitions under Rev. Proc. 2013-30 when applicable.
Salary-to-Distribution Optimization Blueprint
Mathematical modeling balancing self-employment tax savings, Section 199A deduction caps, retirement contribution capacity, and cash distributions.
Shareholder Basis Tracking Schedule
Formal calculation of debt and stock basis under IRC § 1366 to ensure tax-free distributions and loss deductibility.
Corporate Formalities & Governance Directives
Detailed operational checklist to preserve corporate veil integrity, including board minutes documentation and corporate asset separation rules.
Tailored Scope for Your Situation
Have a unique transaction, multi-entity portfolio, or complex interstate requirement? Alan Balmer structures bespoke scopes designed around your exact capital timeline.
What the Client Must Provide
Elite tax strategy is a collaborative partnership. Defensible tax posture requires complete, timely operational records.
Trailing 12 Months of Profit & Loss Statements
Accurate profit and loss records showing revenue, cost of goods, operational overhead, and owner draws.
Owner Role & Time Allocation Breakdown
Detailed breakdown of hours worked per week and operational duties performed (administration, sales, specialized service delivery).
Current Entity Formation Documents
Certificate of Formation, filed Articles of Organization, Operating Agreement, and federal EIN assignment letter.
Historical Return Filings
Prior two years of federal Form 1040 (with Schedule C) or Form 1120-S returns.
The Engagement Process.
A disciplined, four-stage progression from preliminary mutual-fit review to finalized blueprint delivery.
Mutual Fit Consultation (Text or Email)
Reach out directly via text or email. Consultations are complimentary and scheduled at Alan's discretion following an initial review to confirm mutual fit.
Financial Modeling & Feasibility Diagnostic
We analyze your net profit, calculate precise FICA tax savings, and evaluate S-Corp suitability against administrative costs.
Reasonable Compensation Modeling & Filing
Alan compiles your salary defense dossier, drafts Form 2553 (with late-election petitions if required), and coordinates with the IRS.
Execution Blueprint & Governance Directives
Alan delivers your finalized compensation report, distribution schedule, and structural guidelines for ongoing compliance.
Fee Structure & Models
- ✓ Engagement Models: S-Corporation advisory is structured as either a flat project fee (for entity conversions, reasonable compensation studies, or late-election relief) or as a fixed annual or quarterly advisory retainer for ongoing entity counsel.
- ✓ Measurable Return on Investment: Eliminating self-employment taxes on $50,000–$150,000+ of distributions routinely generates $5,000 to $18,000 in immediate annual savings.
- ✓ Finalized After Free Consultation: Your exact project fee or retainer investment is finalized after a free, no-cost, no-obligation consultation with Alan Balmer, CPA.
Proof, Precedent & Experience
✦ 25+ Years of Entity Tax Counsel
Alan has structured hundreds of successful S-Corporations across Texas and nationwide, helping entrepreneurs keep more of their hard-earned revenue.
✦ Institutional Audit Precision
Trained at Laventhol & Horwath, Alan builds compensation and basis documentation that withstands aggressive IRS scrutiny.
✦ 100% CPA-Engineered Deliverables
No automated software shortcuts or generic templates. Every compensation study and election package is calculated and assembled directly by Alan Balmer.
Frequently Asked Questions.
Clear, definitive answers to common strategic questions regarding this practice area.
At what net income level does an S-Corporation election make sense?
What happens if I set my S-Corp salary too low?
What if I missed the March 15 deadline to elect S-Corp status?
Should I hold real estate inside an S-Corporation?
Can an S-Corporation have foreign shareholders or investors?
All advisory modeling, election filings, and structural recommendations in this practice area adhere strictly to the Internal Revenue Code, Treasury Regulations, and relevant state statutory codes:
- § Internal Revenue Code Subchapter S (§§ 1361–1379)
- § Internal Revenue Code § 162 (Trade or Business Expenses - Reasonable Salaries)
- § IRS Revenue Procedure 2013-30 (Late S-Corporation Election Relief)
- § IRS Wage and Investment Technical Fact Sheet: S-Corporation Compensation
- § Texas Business Organizations Code Chapter 101 (Limited Liability Companies)
Ready to Discuss Your Tax Strategy?
Consultations are complimentary and scheduled directly with Alan Balmer, CPA following an initial direct review to confirm mutual fit.