S corps can be advantageous for various types of businesses due to their tax benefits. Here are the criteria that make a business a good fit to be an S corp:

• High Margin Businesses – S corps are best for businesses that have high income and low expenses. The S corp tax benefit is based on your business’ profit, not revenue. We recommend that you have a conversation with a CPA regarding an S corp election once you have $80k in annual profit.
• Businesses in Operation 3+ Years – Electing your business to be taxed as an S corp involves a great deal of new compliance and government registrations. If you are only planning to be in operation a year or two, the tax savings may not be worth the time it takes to get this all set up and later dissolved.
• Businesses with One, Two, or Three Owners – S corps are inflexible as it relates to distributions and allocation of income. The more owners an S corp has, the more frustrating it becomes for owners.
• Active Businesses – The primary benefit of an S corp is the elimination of the self-employment tax. Self-employment tax isn’t assessed on passive activities such as rental properties.
• (Bonus – Not Required) – Businesses that Plan to Sell in the Future and Want to Take Advantage of QSBS – Businesses that start as an S corp to save on taxes can later convert to a C corp to take advantage of a larger Qualified Small Business Stock (QSBS) exemption. This strategy can help you exclude a minimum of $10 million at time of sale.

Businesses that Should be an S Corp

• Real estate agents and brokers
• Financial advisors
• Law firms
• Medical practices
• Dental practices
• Consulting firms and consultants
• Accounting firms and tax preparers
• Architectural firms
• Engineering firms
• Freelancers and independent contractors
• Insurance agencies
• Marketing agencies
• Graphic design studios
• Software development studios
• IT consulting firms
• Web development firms
• Interior designers
• Property managers
• Physical therapists
• Chiropractors
• Speech therapists
• Veterinary clinics
• Event planners
• Public relation firms
• Writers and authors
• Landscaping businesses
• Electricians 
• Contractors
• Carpentry businesses
• HVAC companies
• Cleaning services
• Painting companies
• Handyman services
• Fitness instructor and gym owner
• Dance and yoga studios
• Martial arts schools
• Photographer and videographers
• Auto repair
• Hair salons
• Nail salons
• Barber shops

Businesses that Should (Probably) Not be an S Corp

• Tech startups that aren’t profitable
• Investment rental properties
• Low-margin restaurants (exceptions apply)
• Low-margin retailers (exceptions apply)
• Low-margin distributors (exceptions apply)