The pitch for an S-corp is always the same: split your income into salary and distributions, pay payroll tax on the salary only, and skip self-employment tax on the rest. True, as far as it goes. What gets left out is that the S-corp isn't free. Payroll has real costs, and the paperwork isn't nothing, so the savings only show up once profit clears a certain line.
Why there's a threshold at all
Below a certain profit level, the extra cost of running payroll, filing a separate business return, and keeping cleaner books can eat most or all of the self-employment tax you'd save. Above that line, the math flips, and the savings start to outpace the overhead by a real margin.
Where exactly that line sits depends on your specific numbers: profit, what a reasonable salary looks like in your line of work, and what payroll and bookkeeping actually cost you to run. It is not the same number for every business, whatever a forum post says.
The mistake that actually costs money
It's not making the election too late. It's making it and then never adjusting the salary as the business changes. A number that made sense in year one can be wrong by year three, in either direction.
If you've been meaning to ask "am I past that line yet," bring us your actual profit number and we'll tell you honestly, one way or the other.
This post is general information, not specific tax, accounting, or legal advice. Your situation may differ, so talk to us before acting on anything here.