From Business Owner to Wealth Builder: Maximizing Tax Savings With Your S Corp

As Head of Tax Advisory at Compound, Kristin Carter has nearly 20 years of expertise in tax compliance and planning, and spearheads our tax advisory team. Her mission: to make the ins and outs of taxes approachable and exciting. She’s the most passionate person about taxes we know, and one of the most fun.

Business owners have to consider the whole picture of their finances.

That means thinking further out than today’s revenue gains and planning for the future. Financially-savvy business owners know there are proactive actions they can take today to save more as their business grows — and they’re turning those savings into long-term, wealth-building investments.

For many business owners, transitioning their LLC to an S Corp is a helpful tax savings decision. But an S Corp election is more than just a way to cut back on taxes — it can be a strategic financial vehicle that supports your long-term growth, protects your assets, and aligns with your future goals: business and personal.

Below, you’ll hear how business owners navigate the “what’s next” after making the switch to an S Corp, including the financial decisions they make to maximize the output of their tax savings (moving from “business owner” to “wealth builder”).

Let’s get started.

The Hidden Potential of Strategic Entity Structure Moves

I've seen the difference between business owners who build real wealth beyond their business gains. 

In general, most business owners are reactive when it comes to tax planning. They start as sole proprietors or with LLCs, which works fine for small side hustles. But as revenue grows, they get blindsided by taxes. The wealth builders, though? They’re proactive — they’ve planned three steps ahead.

The business owners who really build wealth aren't just thinking about this year's tax bill. They're asking themselves: How does my business structure help me hit my bigger financial goals?

Here's what's different: while most founders only think about entity structure for tax compliance — and maybe some tax savings — wealth builders see it as a foundation for long-term financial strategy. When their business income hits six figures, they're not scrambling to react to a painful tax bill. They've already set themselves up to capitalize on their success and maximize savings.

Beyond just switching to an S Corp for tax savings, these business owners use their entity structure to fuel business expansion, build retirement wealth, and create investment opportunities. They understand that the right structure isn't just about saving money — it's about reallocating every bit in a way that compounds over time.

Their business structure becomes a wealth-building machine that — with just a few key decisions and clicks in their financial dashboard — continues running for them in the background.

What 15.3% in Tax Savings Means in Practice 

If the time is right in your business journey, switching to an S Corp could save you 15.3% in taxes. 

Still deciding whether to make the transition to an S Corp? Here’s a step-by-step framework for navigating the decision (one green flag: if your business income has crossed the six-figure threshold).   

Consider this: If switching to an S Corp saves you $20,000 annually in self-employment taxes, that's not just money back in your pocket — it's $20,000 you can invest in any part of your life. When you run the numbers on what that looks like over 10 or 20 years, the difference is huge. 

Below are some of the ways you can build your financial future by reallocating your tax savings.

Grow Your Retirement Savings

When you save on your tax bill as a result of your S Corp, you can put those savings towards your retirement funds. A byproduct: When you set aside money for the future, you can also cut down your tax bill. 

There's lots of options for you to save for retirement by using your S Corp income or your LLC income. Instead of paying it to the IRS, you can put it into a SEP IRA or a Solo 401(k).

A SEP IRA is easy to set up and has high contribution limits (up to 25% of your net earnings, or $69,000 in 2024). A Solo 401(k) has even higher limits (up to $69,000 in 2024, plus a $7,500 catch-up contribution if you're over 50) and can be used for both you and a spouse.

Using your Compound dashboard, we can model the difference that investing that money can make: what the cash flow looks like later on, and how that impacts your entire financial plan.

If your goal is to save $500,000 for retirement, we can mock up how your retirement savings contributions from your tax savings can help you hit this number and when. If your goal is to retire at a certain age, we can model the amounts you’d need to contribute over time.

Reinvest for Future Growth 

Future-minded business owners are reinvesting their tax savings for long-term growth. 

You’re likely saving for any number of life goals already: financial support for future generations, your children’s education, family planning, real estate purchases. Reinvesting your tax savings can help you reach those goals sooner. Generally, alternative investments offer a high return potential across asset classes, relatively low risk, and a way to diversify your portfolio. 

A few alternative investment types: 

• Public: Public REITs, which produce consistent income and support diversification, or public real estate companies that are not REITs 
• Private real estate: Individual ownership, which means you own the property and manage it, or private deals, where you and a group of partners pool funds 
• Venture capital: This can be high-risk, high-return

 Learn about more investment opportunities in our “Business Owners” manual. 

Reinvesting offers a holistic approach to help you understand how to turn your S Corp tax savings into wealth — without handing the money over to the IRS. 

Reinvest in Your Business

Just like your tax savings can go into financial investments, they can also go back into your company. $50,000 saved can be $50,000 redirected to growing your business—whether the funds go into hiring, marketing, territory expansion, or other priorities.

From Business Operator to Strategic Wealth Builder

Your entity choice today should support where you’re headed tomorrow. 

In my conversations with business founders, I always ask about their long-term financial goals: good tax planning has a compounding effect.  

In your Compound dashboard, you’ll see the concrete impact of entity structure changes. 

If you currently have an LLC and you’re making significant business income, it’s easy to illustrate what your tax bill would look like with the switch to S Corp and how much you could potentially save. We can also show you your potential savings for the following year using your projected revenue and entity structure. 

Smart business owners think way bigger than "How do I cut my taxes this year?" They're making strategic moves because they know that business decisions don’t live in a vacuum: They’re part of a much larger wealth-building game plan that plays out over decades.

The structure you choose today can have a serious impact on your financial future. The business owners who get ahead are the ones who connect the dots between smart tax moves today and serious wealth-building down the road. 

If you want to see the step-by-step process for choosing whether or not to switch to an S Corp, check it out here.