Think Before You Elect: The S-Corp Trap for New Entrepreneurs

Starting a new business as a side hustle? That’s great—but don’t let someone talk you into an S-Corp election for your LLC without doing the math first.

We see it all the time: A new business owner with a W-2 job gets told to “go ahead and file as an S-Corp”—no questions asked. Bad advice. While an S-Corp can offer real tax advantages, it also comes with added complexity, payroll requirements, and risks if your profits aren’t consistent yet.

If you're already paying into Social Security and Medicare through a W-2 job, the tax benefit of an S-Corp may be smaller than you think. A qualified attorney and tax professional should help you run the numbers and evaluate your specific situation—not push a one-size-fits-all strategy.

Bottom line: If someone suggests an S-Corp without a full analysis, it might be time to find better advisors.