Did you know that you can receive all of the tax benefits of an S corporation without incorporating? How? By filing a simple form with IRS, an LLC can elect to be taxed as an S corporation. Doing so avoids all of the corporate formalities of a corporation, but rewards you with the tax benefits. No need to hold board of directors meetings, record minutes, make regular filings, etc.
If you have been operating your business as a sole proprietor for several years and your business is growing, you can reduce your taxes by being taxed as an S corporation. Reducing your overall employment tax liability is possible because you can be both the owner and an employee of your corporation. Employment taxes must be paid on the amounts received as salary. However, shareholders can also receive dividends from the corporation. No employment taxes (social security and medicare taxes) need to be paid on a dividend.
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