How do small business owners save on taxes?

One way to save on taxes is through something called an S-election.

When you set up an LLC or sole proprietorship, you have to pay self employment taxes, which are around 15% of all profits you make in the company.

The alternative is that with an S-election, you can actually pay yourself a normal salary as employee of the corporation, but any distributions you take beyond the salary are not subject to the self-employment tax.

So, this could be of great benefit and save you thousands of dollars.

If you want to take advantage of the S-election, you have to file it within 75 days of forming your corporation, or you need to file it within 75 days of the next taxable year for your entity.

So remember, there are time limits on this, but there are a lot of benefits in terms of saving thousands of dollars if you make this S-election and it makes sense for you.