Self-Employed & Non-QM
If You’re Self-Employed, This Tax Decision Is Worth Understanding
Should my self-employed business be an LLC or an S-Corp for taxes?
It depends on your profit level, and the decision should be intentional. LLCs and partnerships are typically subject to self-employment tax on profits, while an S-Corp can reduce that exposure by changing how income is classified. Once a business reaches certain profit levels, staying an LLC may mean paying more self-employment tax than necessary. Timing matters too: some S-Corp elections can be made retroactively, but others must be filed by specific deadlines like March 15.
If you’re self-employed and taxes always feel confusing, you’re not alone.
Most business owners are focused on running their business — not on how entity structure affects taxes until it’s too late.
What many people don’t realize is that how your business is set up can significantly impact how much you owe the IRS.
That’s why I sat down with tax resolution and tax planning expert Alexander Goussis to talk through one decision that comes up often: LLC vs. S-Corp.
Why This Conversation Comes Up So Often
A lot of people form an LLC because they’re told it’s “the right thing to do.”
And for liability reasons, that can make sense.
But from a tax perspective, an LLC is often just the starting point — not the end goal.
According to the IRS, many small businesses operate as pass-through entities, meaning profits flow directly to a personal tax return and are taxed accordingly.
https://www.irs.gov/businesses/small-businesses-self-employed/business-structures
If you’re profitable, the way that income flows matters more than most people realize.
LLCs, S-Corps, and Self-Employment Tax
Here’s the key difference most people miss:
- LLCs and partnerships are typically subject to self-employment tax
- S-Corps can reduce that exposure by changing how income is classified
The IRS explains that self-employment tax covers Social Security and Medicare and applies differently depending on how income is earned.
https://www.irs.gov/businesses/small-businesses-self-employed/self-employed-individuals-tax-center
As Alexander explains, once a business reaches certain profit levels, continuing as an LLC may mean paying more in self-employment taxes than necessary.
That doesn’t mean everyone should be an S-Corp — but it does mean the decision should be intentional.
The Timing Matters More Than People Think
One of the biggest misconceptions is that tax decisions can only be made before the calendar year ends.
In reality, there are situations where:
- An S-Corp election can be made retroactively
- Certain elections must be filed by specific deadlines, such as March 15
- Waiting too long can close the door on legitimate planning opportunities
The IRS outlines election timing and filing requirements for S-Corporations directly:
https://www.irs.gov/forms-pubs/about-form-2553
This is why early-year conversations matter — not after a tax bill shows up.
How Business Structure Impacts More Than Taxes
This topic doesn’t just affect what you owe the IRS.
Your business structure can also impact:
- How income is documented
- How returns are filed
- How lenders evaluate income if you’re applying for a mortgage
The Consumer Financial Protection Bureau highlights how income documentation and financial structure affect major financial decisions.
https://www.consumerfinance.gov/consumer-tools/
We see this often when borrowers aren’t sure how they file — because income may flow directly through a personal return instead of a separate business return.
Understanding this ahead of time prevents confusion later.
Watch the Full Conversation
In this video, we walk through:
- When an S-Corp election may make sense
- Why self-employment tax catches people off guard
- How LLCs, partnerships, and S-Corps are taxed differently
- When to have a conversation before deadlines hit
Watch the full video here:
How to Get Clarity on Your Specific Situation
Every business is different.
Profit levels, timing, and future plans all matter.
If you’re self-employed and want clarity on tax structure or IRS concerns, having a conversation can help you understand what options may still be available.
Alexander Goussis
Tax Resolution & Tax Planning Specialist
Freedom Tax Relief Services
Website: https://freedomtaxreliefservices.com
Phone: 516-708-6645
Email: alex@iraawaytoday.com
Final Thought
At Interconnect Mortgage, our goal is education — not pressure.
When tax decisions, business structure, and homeownership overlap, clarity matters.
The earlier you understand how the pieces fit together, the more options you tend to have.
If you want clarity on how this connects to your financial or homeownership plans, the first step is a conversation — not a commitment.
👉 Schedule a conversation here:
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Disclaimer:
This content is for educational purposes only and not a commitment to lend.
Interconnect Mortgage, a DBA of Palm Beach Mortgage Group Inc., NMLS 373094.
Licensed in Florida.
Check licensing at NMLS Consumer Access.
Frequently asked questions
What is the tax difference between an LLC and an S-Corp? +
LLCs and partnerships are typically subject to self-employment tax, which covers Social Security and Medicare. S-Corps can reduce that exposure by changing how income is classified. Once a business reaches certain profit levels, continuing as an LLC may mean paying more in self-employment taxes than necessary.
Can an S-Corp election be made retroactively? +
In some situations, yes — an S-Corp election can be made retroactively. But certain elections must be filed by specific deadlines, such as March 15, and waiting too long can close the door on legitimate planning opportunities. That is why early-year conversations matter, not after a tax bill shows up.
Does my business structure affect getting a mortgage? +
Yes. Your structure impacts how income is documented, how returns are filed, and how lenders evaluate your income when you apply. Many borrowers are not even sure how they file, because income may flow directly through a personal return instead of a separate business return. Understanding this ahead of time prevents confusion later.
Should every self-employed business owner become an S-Corp? +
No. It does not mean everyone should be an S-Corp — but the decision should be intentional, not accidental. Profit levels, timing, and future plans all matter, which is why it is worth a conversation with a tax professional before deadlines hit.
About the author
Toni Taylor Gozza — Mortgage Expert
NMLS #274323
I'm Toni Taylor Gozza, a Mortgage Expert with Interconnect Mortgage in Palm Beach Gardens, Florida, NMLS #274323. I help self-employed borrowers, first-time buyers, and people with complex income or substantial assets explore mortgage options that fit how their finances actually work. My approach is education first: I explain the choices in plain English so you can make an informed decision without being pushed into a loan you don't need. Credentials: NMLS #274323; Interconnect Mortgage, a DBA of Palm Beach Mortgage Group Inc., NMLS #373094 Expertise: Non-QM & creative financing, asset depletion, self-employed borrowers, first-time buyers
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