Putting It Together

The architecture assembles into a sequence, each step triggered by the size and trajectory of the business:

1.

Confirm the activity is a business, not a hobby — keep books, separate finances, and operate to make a profit.

2.

Start as a sole proprietor or single-member LLC; treat the LLC as liability protection, not a tax strategy.

3.

When net profit clears roughly $80,000 to $100,000, model the S-corporation election to cut self-employment tax — and set a reasonable, documented salary.

4.

Use that salary to satisfy the IRC §199A wage test, and watch the SSTB thresholds.

5.

In a high-tax state, elect the pass-through entity tax before the deadline to deduct state tax above the SALT cap.

6.

Implement an accountable plan, use the Augusta rule with documentation, and fund a Solo 401(k).

7.

If the business is built for a venture-scale exit, incorporate as a C-corporation early to start the IRC §1202 clock — the eventual exclusion is worth the interim double taxation.