Who Should Help You Elect S-Corp: Your Accountant or an Attorney?

We had a contractor come to us who paid an attorney $50,000 to elect S-Corp status.

Fifty. Thousand. Dollars. For paperwork that’s a few hundred bucks of filing plus some ongoing tax work.

That’s the most expensive version of a mistake a lot of contractors make: hiring the wrong professional for the job. So let’s settle it. This article is for contractors deciding WHO should set up their S-Corp, and what it should actually cost, so nobody gets fleeced.

Key Takeaways

• An S-Corp election is a TAX decision, not a legal one. The right person is a tax pro (CPA or Enrolled Agent), not an attorney.
• Attorneys know the legal side. They generally won’t set your reasonable compensation, won’t run your payroll, and won’t do the ongoing tax strategy, which are the parts that actually save you money.
• A fair price is modest. The election filing is cheap. The value is in the ongoing tax work, payroll, and the annual S-Corp return, not a giant one-time “setup” bill.
• $50,000 for an S-Corp election is a ripoff. If someone quotes you five figures for the election itself, walk.
• The election is step one. Staying compliant is the real job, which means reasonable comp, payroll, filings, clean books, every year.

Why an Attorney Is the Wrong Choice

Attorneys are great at legal things. Forming the LLC, partnership agreements, contracts, liability, that’s their lane. And because they can form the LLC, contractors assume they should also “do the S-Corp.” That’s where it goes sideways.

The S-Corp election isn’t a legal maneuver. It’s a tax classification. You’re changing how the IRS taxes your income. And here’s what an attorney typically will NOT do:

• Set your reasonable compensation. This is the whole ballgame (see reasonable compensation), and it’s a tax/valuation judgment, not a legal one. Most attorneys won’t touch it.
• Set up and run your payroll. An S-Corp requires real payroll. Attorneys don’t do payroll.
• File your S-Corp tax return (Form 1120-S). That’s a tax preparer’s job, every year.
• Do ongoing tax strategy. Adjusting your salary as profit moves, coordinating estimates, catching deductions, none of that is legal work.

So if an attorney “sets up your S-Corp,” best case they file the form and hand you a folder. You still have to go find someone to do all the parts that actually matter, and pay for those separately. Worst case, they charge you like it’s complex litigation. Which brings us back to that $50,000.

What It Should Actually Cost

Let’s demystify the price, because the mystery is how people get overcharged.

• The election filing itself (Form 2553): cheap. It’s a form. In a full-service relationship it’s often folded in at little or no separate cost. The IRS doesn’t charge to file it.
• The real, ongoing value: payroll processing, the annual S-Corp return, setting and adjusting reasonable comp, and proactive tax planning. That’s where your money should go, because that’s what saves you the $5,000 to $15,000+ a year the election is supposed to deliver.

A five-figure, one-time bill for “the S-Corp” tells you someone is charging for the wrapper, not the work. The election is the easy part. If the price doesn’t line up with ongoing tax value, that’s your red flag.

Who SHOULD Do It

An accounting firm that does construction tax strategy: a CPA or Enrolled Agent who works with contractors. Here’s why that’s the right fit:

• They run the numbers FIRST to confirm it even makes sense (the $70K net profit rule).
• They file the election on time and handle late-election relief if you missed the window.
• They set a defensible reasonable comp number based on real data.
• They set up and run your payroll, and actually confirm the filings hit the IRS.
• They file your 1120-S every year and coordinate it with your personal return.
• They adjust the whole thing as your profit and your business change.

That’s the difference between “somebody filed a form” and “somebody is actively saving you money and keeping you out of trouble.” Level’s CEO, Jake Andrews, is an Enrolled Agent (a federally licensed tax specialist) and the whole firm does construction tax, so this is squarely the kind of work built for a tax team, not a law office.

The Part After the Election: Staying Compliant

Electing is step one. An S-Corp has ongoing requirements, and blowing them off can cost you the election or trigger an audit. To stay clean, every year you need:

1. Reasonable compensation, paid through real payroll. Not optional. The IRS requires it, and underpaying it is the #1 audit trigger.
2. Payroll tax filings that actually get filed. Quarterly 941s, your W-2. And someone verifying the returns went through, not just trusting a dashboard.
3. A separate S-Corp tax return (Form 1120-S). Every year, on top of your personal return.
4. Clean, reconciled books. You can’t defend a salary or file an accurate return on messy books. Business and personal kept separate, reconciled monthly.
5. Salary reviewed as profit moves. Up in big years, down in slow ones.

This is exactly the stuff that falls through the cracks when you cobbled together an attorney for the setup, a cousin for the bookkeeping, and QuickBooks Payroll running on autopilot. A single team that does accounting for contractors end to end is how it stays handled.

Red Flags When Choosing Who Sets Up Your S-Corp

• 🚩 A five-figure quote for the election itself. The form is cheap. Walk.
• 🚩 Someone who’ll file the election but won’t set your reasonable comp or run payroll. You’ll be paying twice.
• 🚩 No analysis of whether you should even do it. If nobody looked at your net profit first, they’re selling paperwork, not advice.
• 🚩 A generalist who doesn’t know construction. Retainage, progress billing, subs, WIP, contractor books aren’t regular books.
• 🚩 “Set it and forget it” energy. An S-Corp needs annual attention. Anyone who acts like it’s one-and-done is setting you up for problems.

Frequently Asked Questions About Electing S-Corp

The Bottom Line

The S-Corp election is cheap and easy. What makes it worth doing, and what keeps it from blowing up on you, is the ongoing tax work: the right salary, real payroll, filed returns, clean books. That’s a tax team’s job, not an attorney’s, and it sure isn’t a $50,000 one-time bill.

If you want it done right by people who do construction tax all day, book a call at levelaccountingfirm.com. And if you’ve already got an S-Corp that someone set up and walked away from, we’ll tell you what’s missing. Start with the full S-Corp for Contractors guide.

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