Why Smart Sole Proprietors Are Switching to S Corps in 2025

There’s a lot to keep track of as a small business owner—which means a few small things will likely fall through the cracks every now and then.

But, what if you found out that you were losing out on thousands of dollars every year? Yikes. That's not a scare tactic. It’s the truth. And it’s something that happens to a lot of solopreneurs simply because they aren’t strategic about their business entity.

Do we have your attention? We thought so. Here’s why many self-employed people are switching to S Corps, why it might be the best move for your business, and your stress-free guide to making the move.

S Corp: Is It Worth Switching?

Let’s start by quickly covering what an S Corp is. While it’s often described as a business entity, that’s not entirely true. It’s actually a tax status, meaning you can elect to have your business taxed as an S Corp.

An S Corp election does require a little bit of paperwork and administrative oversight (hey, Lettuce can take care of all of that for you), but most small business owners discover that it’s well worth it in exchange for the following benefits.

Maximize Your Tax Savings

The tax savings are one of the biggest advantages of being taxed as an S Corp. To put it simply, sole proprietors will pay significantly less when they’re taxed as S Corps.

Why? Well, when you operate your business as an LLC or sole proprietorship, you pay self-employment taxes on your total taxable income. But, as an S Corp, you split your business income into two categories: your reasonable salary and your business profits.

As an S Corp, you’re an employee of your own business. You set a salary for yourself that’s aligned with what you’d get paid in that role as a traditional employee. You only pay self-employment taxes on your salary.

The rest of your business income falls into the business profits bucket. You can still access and use this money in the form of owner’s distributions. However, it’s not subject to self-employment taxes. That’s where the major tax savings come into play.

The more you earn, the more compelling this benefit is. Generally, if you’re earning more than $60,000 per year through your small business, it’s worth thinking about making the switch. And, people who earn $100,000 or more can save more than $10,000 per year.

Curious how much you could save? Use Lettuce’s tax calculator to enter your business details and discover your potential savings.

Plan Your Financial Future

It’s smart to set aside money for your retirement—and S Corps allow for far better retirement planning and saving.

As an S Corp, you can contribute to your retirement savings as an employee and the employer, which allows for much larger, tax-deductible contributions than if you were operating as an LLC or sole proprietor.

Protect Your Personal Assets

When you establish a business entity — like an LLC that’s taxed as an S Corp — you separate your business assets and liabilities from your personal ones. That means, if your business was ever in debt or sued, people could only come after your business assets and not things like your home or your savings account.

Hopefully, you never need the level of protection that a formal business entity provides. But even so, having one provides a lot of peace of mind. 

3 Common Concerns About Switching (and How to Get Around Them)

There’s no shortage of convincing advantages when switching to an S Corp, yet many solopreneurs still resist the change. Let’s take a look at some common objections—and why they’re not nearly as daunting as you might think.

“The Paperwork Sounds Overwhelming”

You likely didn’t get into business for yourself because you enjoy paperwork. That means the initial setup forms for an S Corp can be intimidating, and accountants don’t always want to help with this.

Get Around It: You don’t need to go it alone. Lettuce will handle all of your S Corp paperwork for you, from your initial incorporation documents to your ongoing compliance requirements.

"I’ve Heard S Corps Are Expensive to Maintain”

There are some additional costs associated with operating an S Corp, like payroll taxes, state registration fees, and more complex tax prep. However, these modest expenses will be quickly outweighed by the major tax savings you get.

Get Around It: Lettuce makes setting up and managing your S Corp affordable and easy. Plus, the platform will automatically allocate your money for things like taxes and retirement savings so you can quickly see what’s yours to keep.

“Running Payroll Sounds Like a Headache”

Payroll seems like one more thing on your already-towering to-do list as a business owner. And, understandably, the last thing you want to do is crunch numbers and stress about payroll tax deadlines.

Get Around It: Lettuce will take care of distributing your money, running payroll, and ensuring your tax compliance so you can get all of the benefits of an S Corp without the payroll problems.

Making the Move (and Maximizing Your Savings)

Convinced it’s time to make the switch to an S Corp? It’s way easier than you might think. Sign up for Lettuce and we will automatically take care of:

• Establishing your business entity (if you don’t already have one)
• Getting your Employer Identification Number (EIN)
• Completing and submitting your S Corp election
• Setting up your business bank account
• Running compliant payroll processing
• Streamlining your bookkeeping and tax preparation

Seriously, it just takes a few clicks, and then all of the administrative ins and outs of your S Corp will happen on autopilot—with no hassles or headaches for you.

Get started by using Lettuce’s tax calculator to see how much you can save by making the switch and then let Lettuce do all of the hard work (yep, even the paperwork) for you.