FOR FREELANCERS AND CREATORS

I Reviewed 32 Freelancers' Entity Elections. The S Corporation vs C Corporation Mistake Cost One $14,200.

(A $49 form defaulted to the wrong box)

Devon booked her first $80,000 brand deal year in June, formed an entity the same afternoon on a $49 website, and never noticed the intake form defaulted to C corporation. It cost her $14,200. I reviewed 32 freelancer and creator books this year where the same four-second checkbox went sideways.

Book Free Review

Real accountants Flat monthly pricing Taxes filed for you

Phoenix · August 30, 2026 · 6 min read

Thirty-two reviews. One recurring mistake.

freelancer and creator entity elections reviewed this year

“I'd been an LLC taxed as a C corp for two years because that's what a formation site set up. Amadae caught it, filed the S election, and restructured my payroll. I kept $11,300 more this year than I would have otherwise.”

Amadae client · Freelance consultant, LLC taxed as a C-corp for two years

The checkbox that cost Devon $14,200

Her manager said get an LLC before the contract closed, so she used a $49 online formation service that afternoon. The default entity on the intake form was a C corporation. By the following spring her business had paid $8,400 in corporate income tax, and when she moved that same money to her personal account as a dividend, she owed another $5,800 on it.

Do this today: Pull up your own formation paperwork today and check the entity type box. If it says C corporation and you never chose that on purpose, fix that first.

Devon's year as a C corporation

Corporate income tax on the profit$8,400

Personal tax on the dividend, same money$5,800

Extra tax as an S-corp, income taxed once$0

Paid for a box she did not choose$14,200

You did not choose double taxation. The default did.

A C corporation pays its own tax, a flat 21% federally, and then you pay again when it distributes profit to you. An S corporation is not a legal entity type at all. It is a tax election: you form the LLC or corporation at the state level, then file Form 2553, and profit passes through to your return once. Most formation sites never mention the second step.

Do this today: Find out whether Form 2553 was ever filed for your entity. If nobody can tell you, it probably was not.

Coffee at green desk — Form 2553 is the whole election. One form, filed on time, and the same profit is taxed once instead of twice.

The 15.3% tax that makes this decision urgent

Nobody hands you a memo when you leave W-2 life explaining that you now owe 15.3% in self-employment tax on top of income tax, before rent or software. As an employee your company paid half without you noticing. Now you pay both halves. This is the tax an S-corp election directly attacks, because only your reasonable salary is subject to it, not the whole profit.

Do this today: Multiply last year's net profit by 15.3% this week. If that number makes you wince, you are already a candidate for the S election conversation.

Self-employment tax on $100K of profit

Sole proprietor, all profit$14,100

S-corp, $60K reasonable salary$9,200

Illustrative, 15.3% rate, single filer, Form 2553 election with payroll

Want all of this handled for you, for one flat monthly price?

Book Free Review

Free 30-minute review. No pitch deck.

04AMADAE

This should not be a solo decision on a $49 form

Devon's mistake was not stupidity, it was structure. A formation website has no idea what your income looks like, whether you are profitable enough to justify S-corp payroll, or whether a C-corp is quietly draining you. Amadae reviews your income, your state, and your growth plans, files the election correctly and on time, then runs the payroll and reasonable salary setup that comes with it, alongside books and quarterlies that point the same direction.

Book Free Review

Who actually reviews the decision

	$49 formation site	Generalist CPA	Amadae
Reviews your income before picking the entity		Sometimes
Files Form 2553 on time		Extra fee
Sets a reasonable salary and runs payroll		Extra fee
Revisits the election when income jumps
Quarterlies and books built around the entity
Pricing	$49 once	Hourly	Flat monthly

Two years as a C-corp by accident. Then $11,300 back.

A freelance consultant had been an LLC taxed as a C-corp for two years because that is what a formation site set up. Amadae caught it, filed the S election, and restructured payroll around a defensible salary. That is the same gap Devon fell into, caught before it repeated for a third year.

Do this today: Ask whoever formed your entity which box they checked and why. If no one can answer in one sentence, get a second opinion.

Amadae client

Freelance consultant, LLC taxed as a C-corp for two years

Kept $11,300 more this year

Summer brand deals change your math faster than your calendar

Peak season for freelancers and creators is peak season for entity mistakes. A single $30,000 brand deal or retainer signed in July can push you from not worth the S-corp paperwork to leaving real money on the table in one invoice. Most people do not revisit the decision until a CPA brings it up the following spring, and waiting costs a full year of savings.

Do this today: If your income has jumped more than 30% from last summer, put revisit entity election on this month's calendar, not next tax season's.

Open office — One $30,000 brand deal signed in July can flip the S-corp math in a single invoice. The election has a deadline; the deal does not wait for it.

BONUSAMADAE

Bonus: The 90-day fix before fall deadlines hit

Back-to-school season is when the next quarterly deadline lands and the I should have planned for this panic shows up. If your entity is wrong, that panic compounds. Amadae runs a structured review of your current entity, your year-to-date profit, and your realistic year-end number, then tells you plainly whether switching, or changing nothing, is the right call before Q4 estimates are due.

Book Free Review

The 90-day review, before Q4 estimates

Current entity and how it is actually taxed
Year-to-date profit and a realistic year-end number
Reasonable salary benchmark for your role and region
Switch, or make no change: a plain answer
Guessing on a $49 form

Thirty-two reviews. One recurring mistake.

freelancer and creator entity elections reviewed this year

$14,200

Devon's cost for one defaulted checkbox

21%

flat federal tax a C-corp pays before you pay again

15.3%

self-employment tax an S-corp election directly attacks

From 32 freelancer and creator book reviews this year, with permission. Rates are current federal rates.

Entity, payroll, and taxes in one place

Books, payroll, and taxes from real accountants, for one flat monthly price starting at $249.

S-corp election reviewed against your real income and filed on time
Reasonable salary set and payroll run for you
Quarterly estimates calculated from year-to-date profit
Year-end federal and state returns filed for you

Book Free Review

No long-term contract. Cancel any time. The intro call is free.

Plans from

$249/mo

If you make $40K - $69K. Flat, no hourly bills.

Monthly profit and loss reports
Tax set-aside management
Expense categorization
Real-time financial dashboard
Business bank account connections
Invoicing and contractor payments

Book Free Review

Cancel any timeReal accountantsTaxes filed for you

Straight answers

Questions creators ask us

Is a C corporation ever the right call for a freelancer?+

Almost never under roughly $250,000, unless you are raising outside capital. A C-corp is built for venture-backed startups, not a designer billing four clients a month. The review will tell you plainly if you are the exception.

What is the reasonable salary rule everyone warns about?+

The IRS requires an S-corp owner to pay a reasonable salary through payroll before taking distributions. Pay yourself $12,000 while netting $140,000 and you have built an audit target. The benchmark is what someone in your role and market would earn doing your job, and we document it in writing.

I already formed an LLC. Do I have to start over?+

No. The S-corp is an election on top of the LLC you already have, filed on Form 2553. If you are accidentally a C-corp, the fix is an election and a payroll setup, not a new company.

Get a clear answer before your next quarterly deadline

Devon's $14,200 mistake was one of 32 I saw this year. The entity decision is a lever that moves thousands of dollars depending on when you pull it. If yours has never had a second opinion, this is the fall to get one.

Book Free Review

Keep reading

C Corp vs S Corp: I Reviewed One Agent's Books. The Wrong Entity Cost Her $19,000.

The c corp vs s corp decision isn't paperwork, it's a tax bill waiting to happen. Here's what a $38,000 contest bonus taught one insurance agent the hard way. (7 min read)

32 Freelancers Didn't Know How To Incorporate. It Cost Them $211,000 This Summer.

A July review of 32 freelancer books revealed the same mistake 27 times: not knowing how to incorporate before their income made sole proprietorship a losing structure.

I Reviewed 31 Freelancers' Tax Returns This Summer. 24 Got 'What Is S Corp' Wrong.

What is S corp, really? I reviewed 31 freelancer tax returns this July and found 24 people paying self-employment tax they didn't have to. 7 min read.