S corp for e-commerce and Amazon sellers: how it works and what to ask a CPA
Short answer: An S corporation is a tax election, made with Form 2553, that an eligible corporation or LLC can choose. Owners who work in the business must be paid reasonable compensation through payroll, and the business files its own return. Whether it makes sense for your store depends on your profit, state rules and costs, so it is a question for a CPA, not a rule of thumb.
What changes with an S corp election
- Payroll: owner-employees are paid wages through payroll, with withholding and payroll filings.
- A separate return: the S corp files its own return, and owners receive a Schedule K-1.
- Clean books: business and personal money must stay separate, and the books must support the return.
- State rules: states treat S corps differently; some add their own taxes or fees.
The IRS has an overview of business structures.
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What your bookkeeping needs to support
- Monthly reconciled books with payouts recorded in full (see Amazon seller accounting)
- Inventory and cost of goods tracked
- Owner payroll run on a schedule
- Owner distributions recorded separately from wages
Questions to ask a CPA
- Given my profit and state, would an S corp election make sense, and from when?
- What salary would be reasonable for my role, and how do you document it?
- What added costs come with the election (payroll, return preparation, state fees)?
- What do you need from my bookkeeping each month?
See which kind of e-commerce accountant you need, or browse tax planning and e-commerce accountants.
Frequently asked questions
What is an S corp?
A federal tax election for an eligible corporation or LLC, made on Form 2553. Income generally passes through to owners, and owner-employees must be paid reasonable compensation.
Should my Amazon business be an S corp?
It depends on your profit, state rules and costs. A CPA can model it for your situation.
What is reasonable compensation?
A salary for owner-employees that reflects the services they provide; the IRS discusses it on its S corporation compensation page.
What bookkeeping does an S corp need?
Reconciled monthly books, inventory tracking, payroll for owner-employees and distributions recorded separately from wages.
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