Solo agent tax setup: when an S-corp starts making sense

Not tax advice; talk to an accountant who works with commissioned reps. But the question comes up constantly, so here's the shape of it.

Year one, sole proprietor. Commissions land as 1099 income. Self-employment tax on the net plus income tax. Quarterly estimates due four times a year. Deduct leads, CRM, phone, mileage, E&O, licensing, CE, home office if it qualifies. Keep receipts in one place from day one.

When the S-corp conversation starts. Once net income is consistently in the mid five figures or above, an S-corp election can reduce self-employment tax by splitting income into a reasonable salary and distributions. The savings have to exceed the added costs: payroll processing, a separate return, state fees, and the accountant's time.

What "reasonable salary" means. The IRS expects the salary to reflect what you'd pay someone to do your job. Paying yourself a token salary and taking everything as distributions is the audit trigger. Your accountant sets this number.

Timing. The election has a deadline relative to the start of the tax year; missing it means waiting. Many agents make the move in their second or third year once income is predictable.

Entity and carriers. Commissions can be paid to an entity if the entity is licensed as an agency in your state, which is its own process. Some carriers pay entities easily; some make it painful. Ask before you restructure.

Retirement. A solo 401(k) or SEP can shelter a meaningful chunk of a good year. The contribution rules differ by entity type.

What did your accountant tell you was the income level where the S-corp paid for itself?