Is an S-corp election worth it in Wyoming?

Work it out on your own numbers

The figures below use $100,000 of profit and our standard assumptions. Put your own in instead, this compares staying a sole proprietor against electing, with Wyoming's own charges on the company included:

What the election is worth on $100,000 of profit

A single filer taking the standard deduction, paying themselves 40% of profit as salary, with $1,500 a year of payroll and filing cost:

The profit range where it actually pays in Wyoming

From about $20,000 of profit upwards. Below that, the $1,500 of payroll cost is more than the saving.

What Wyoming does differently

Wyoming levies no personal income tax, so the entire question here is federal. The election saves payroll tax on the distribution and nothing else, there is no state layer for it to move, and no state return for the S-corp's owners to reconcile.

The Wyoming detail

Wyoming has no corporate income tax, no personal income tax, no franchise tax on income and no gross receipts tax, so the federal election has no Wyoming income tax consequence at all. The only recurring charge is the annual report license tax: the greater of $60 or $0.0002 per dollar of Wyoming assets, so the $60 floor holds until Wyoming assets pass $300,000. Wyoming is also the state people incorporate in without operating there, drawn by the absence of a franchise tax and by ownership that is not on public record. That is a privacy and cost decision rather than a tax one, if you work somewhere else you still register there as a foreign entity and pay that state in full. Wyoming is not accepted by most venture investors, who expect a Delaware C corporation.

How much salary to pay yourself

Less salary means less payroll tax, so the arithmetic always points at the smallest salary you can justify. That is exactly why it is not a number to optimize: compensation has to be reasonable for the work you do, and the penalty for getting it wrong is reclassification plus back payroll tax. The cheapest row here is the riskiest one.

What this assumes

• Single filer, standard deduction, the business as the only income.
• 40% of profit taken as salary in the headline figures.
• $1,500 a year for payroll and a separate 1120-S, a cost estimate, not a tax figure, and it varies by provider.
• Comparing against a sole proprietorship. If you already trade through an LLC, some state fees are owed either way and are not a cost of electing.
• Anything listed as not modeled above is genuinely owed, it is excluded because it does not depend on profit, not because it is nil.

What these words mean

Gross receipts

Everything the business took in, before subtracting any costs. A tax on gross receipts is owed even by a business making a loss, which is what makes it different from a tax on profit.

Franchise tax

A charge for the privilege of operating as a company in a state. Despite the name it has nothing to do with franchises, and it is often owed whether or not the business made money.

C corporation

A company taxed as a separate taxpayer in its own right, so profit is taxed once to the company and again to the owner when paid out. The thing an S corporation election is meant to avoid.

S corporation election

Asking the tax office to treat your company as a pass-through, so profit is taxed to you rather than to the company. The owner takes a salary and the rest as a distribution, which is what saves payroll tax.

Distribution

Profit paid out to a company’s owner that is not salary. It is not subject to payroll or self-employment tax, which is the whole point of the S corporation election. And why the salary has to be defensible.

Related

• S-corp calculator (all states)
• 1099 taxes in Wyoming
• Quarterly payments in Wyoming
• S-corp in Colorado
• S-corp in Idaho
• S-corp in Montana
• S-corp in Nebraska