It is called an S-corp because it is derived from Chapter S of the Internal Revenue Code.
This is a favorite strategy among business owners.
It is a hybrid type of business entity that eliminates the double taxation inside a C-corp and also includes features of a partnership. Partnership owners usually pay 15.3% FICA tax as well.
A major benefit is that a ½ portion of your FICA Social Security Tax is actually deductible as an operating expense of the business! This alone easily can save $5,000 per year or more of tax. You also get to deduct your salary as an operating expense of the biz.
Requirements: You should be an LLC already if possible, then file an S-election (we can help) to have your biz treated as an S-corp for taxes. Note: you are still an LLC to your state. Realtors: you should be a PLLC with the state of AZ if you sell in AZ.
You must take a reasonable salary. Remember, there is no one giving you a paycheck and deducting taxes, therefore you are responsible that this is done. (We can run your payroll for a fee). We generally suggest you take ½ your income as salary and the rest is usually a taxable distribution of the biz earnings. If you take no salary, you run a high risk of having 100% of your income classified as a salary, and having the corporate veil pierced by the IRS.
Another advantage of running a regular monthly salary is that you most likely will not need to send in estimated quarterly tax payments since you have tax withheld from each pay check.