Why an S Corp is Less of a Commitment Than You Might Think

Choosing to become an S Corp can feel like a big leap, especially for freelancers and solo business owners who value flexibility. One of the biggest mental blocks is the fear that it’s a forever decision.

Here’s the good news: electing S Corp status is not permanent. If it ever stops making sense for your business, you can easily unwind it.  The same is true for creating or dissolving an LLC.

Let’s break it down.

S Corps Don't Have to Be Forever

That's a good thing. When you become an S Corp, you're not creating a new company, you're changing how your existing business is taxed. It’s a tax election, not a new entity. That means it can be changed and unelected.

Some people might think that making a change to their business is a major commitment, like buying a house or getting married. In reality, it’s not–you’re only making a commitment for that tax year. Think of it more like signing a one-year lease.

Why You Might Want to Unwind an S Corp

Many solos choose to unwind their S Corp for perfectly valid reasons:

• Your revenue drops below the typical threshold where S Corps save you money (usually around $70K/year).
• Your business model changes (maybe you decide to get investors and hire many employees) and the S Corp structure no longer fits.
• You decide to retire or take a full-time job instead.

None of those are problems. They’re just part of running a business, and the S Corp election is built with that flexibility in mind.

What It Actually Takes to Unwind an S Corp

Unwinding an S Corp sounds dramatic, but it’s not nearly as intense as it seems. Here’s what the process generally looks like:

1. Send a revocation letter to the IRS. This formally ends your S Corp status.
2. Update your payroll and tax withholding. Since S Corps include a W2 salary, this gets restructured and your LLC’s earnings will all be subject to payroll taxes again.
3. Adjust your business filings (if needed). In some states, you may need to update your business entity classification.

That’s it. No massive legal battles, no long-term penalties, no "you can never come back" policies. Just a few steps to return to your previous setup. 

It is important to note that the IRS will not permit re-election as an S Corp for 5 years after revoking it on your existing LLC.  If you decide that you need an S Corp prior to that, you can create a new LLC and elect as an S Corp with no problem.

Don't Let "What If" Hold You Back From Saving Thousands 

If you’re earning more than $80,000 a year, switching to an S Corp could save you thousands in taxes annually. But too many consultants and solos stay on the sidelines because they’re afraid of being locked in.

The truth? You're not locked in. Not even close.

With Lettuce, you can test out the S Corp structure — and keep it only as long as it works for you. If things change, we’ll help you change too.

Final Thought

Becoming an S Corp isn’t a life choice. It’s a smart strategy that comes with a built-in exit plan whenever it makes sense for your business and your life.