Scenario: In the United States. Software Developer who performs consulting for other businesses. Paid an hourly rate of $150 per hour for full time work (1860 hours). Additionally, the software developer creates software products, and lets say, on average sells $400,000 in company created software tools and products in the calendar year.
Does it make sense to create an S-Corp and set the reasonable salary at the $150*1860 rate, and then be able to take the $400k in software sales as a distribution?
Is there any way to keep some of the money in the business to allow, for example, to hire additional software developers for internal R&D, or to make up for years where there is no software product sales, or the consulting hours are significantly cut?