Freelance to Founder The Real Truth About S-Corps (Don't Get Tricked)
Nov 25, 2025
In this insightful discussion, George Azar, a CPA with nearly a decade of experience, shares expert insights on the complexities of S-Corporations. He debunks common myths about big tax savings from S-Corp elections, emphasizing the importance of understanding marginal versus effective tax rates. George outlines the self-employment tax burden for freelancers and explains the significance of reasonable salary requirements. He stresses the need for a careful cost-benefit analysis before choosing the S-Corp path, warning against biased advice from some advisors.
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Specialist Born From Client Mistakes
- George started specializing in S-corps after seeing many clients misapply the rules and get poor results.
- He found clients who were told to S-elect but hadn't set up payroll or reasonable salary correctly.
Two Separate Taxes Hit Freelancers
- Self-employment tax (15.3%) is separate from income tax and hits your net business income regardless of bracket.
- This payroll-equivalent tax makes freelancers pay both income tax and Social Security/Medicare on their net earnings.
S-Corp Is A Tax Election, Not A New Entity
- An S-corp election is a tax election that changes how profits are taxed, not your legal business form.
- Net S-corp earnings pass through via a K-1 and avoid self-employment tax when properly split into salary and distributions.