r/Tax_Strategy

I’m posting here because I need some serious tax strategy eyes on our current business setup. My brother and I run a specialized IT contracting LLC, and our CPA had us elect C-Corp status last year. I thought everything was fine, but lately I’ve been reading through strategy breakdowns and now I’m having major doubts. For context, we bring in around $100k each before taxes. We have to be incorporated because our enterprise clients require a solid corporate shield-our contracts fluctuate heavily (sometimes we're on a project for two years, sometimes just two months).

His big argument for the C-Corp election was that it opens up tax-free medical reimbursement plans (Section 105), lets us write off specific fringe benefits, and keeps our personal income tax lower since we can leave a chunk of cash inside the business to scale operations. But from a pure tax strategy standpoint... almost everything I see online insists that an S-Corp is the standard choice for our income level to avoid double taxation and save on payroll taxes via distributions. When I brought up the S-Corp alternative to my CPA, he basically warned us that lowballing our salary to take massive distributions is a total audit trap and not worth the stress.

So now I’m stuck in the middle. Is a C-Corp for a small 2-man service business a brilliant loophole for the fringe benefits, or did our accountant put us in a completely sub-optimal structure?

I’m curious what yu guys think about this setup. Am I missing some hidden benefit of the C-Corp here, or should we look into switching to an S-Corp election before next tax season? Appreciate any blunt feedback. Thanks!

I run a small ecommerce business and crossed nexus in a few states. How do you manage it now that is less of a hassle to actually manage day to day?