Structuring your business as an S corporation becomes tax-advantageous once income surpasses $100-150k. This allows you to pay yourself a "reasonable salary" subject to payroll taxes, while the remaining profit can be taken as a distribution, which is not subject to Social Security taxes.

While an S-Corp has higher administrative costs ($3-5k/year), the tax savings become significant once net profit hits the $50-60k range. By paying yourself a "reasonable salary" and taking the rest as a distribution, you avoid the 15.3% self-employment tax on a large portion of your profit.

The wealthy pay less tax not because they earn less, but because they focus on reducing *taxable income*. Investments like real estate provide legal deductions such as depreciation, which significantly lowers the income they actually pay taxes on, a concept unavailable to most W-2 earners.

Don't rush to form an S-Corp. The tax savings typically don't outweigh the added costs and complexity, like running payroll, until your business is generating at least $60,000 to $80,000 in profit. Before that, a sole proprietorship or standard LLC is often more efficient.

An LLC is a legal designation for liability protection, not a tax classification in the eyes of the IRS. By default, a single-member LLC is taxed identically to a sole proprietorship. To change this, you must proactively file to be taxed as an S-Corporation.

Tax changes since the 1980s made pass-through entities (S-Corps) incredibly lucrative. This structure, often labeled "small business," now accounts for over half the income growth for the top 1%, shifting the focus from publicly-traded company wealth.

The US tax system disproportionately penalizes high-income 'workhorses' (e.g., doctors, lawyers) who earn from labor. In contrast, the super-rich, who derive wealth from capital gains and have mobility, benefit from loopholes that result in dramatically lower effective tax rates.

Bezos takes an $82,000 salary, low enough to claim a child tax credit, while his wealth grows via untaxed stock appreciation. He then borrows against these shares, avoiding a taxable event. This perfectly legal strategy highlights how billionaires leverage the tax code to pay a lower effective rate.

The US tax system penalizes high-income salaried workers ('earners') more than those whose wealth comes from equity ('owners'). Equity compensation, common for CEOs, benefits from lower capital gains rates and tax-deferred growth, which fundamentally worsens wealth inequality.