How One Software Business Saved $150K+ in Taxes with C Corp & QSBS Strategy
- Billy Amberg
- May 6
- 5 min read
Updated: 5 days ago
Welcome back to another case study, where we dive deep into real client scenarios and the strategic planning that goes into achieving big financial wins. Today’s focus: a high-growth software implementation company and how strategic entity structuring and tax planning are projected to save the owner hundreds of thousands—potentially even millions—in taxes.
Let’s start with the results, then break down how we got there.
Case Overview: High-Growth Software Business with Big Goals
Meet "John," the owner of a software implementation business generating $11 million in annual revenue (as of 2024), with similar or higher projections for 2025. The company’s net profit sits at around $1.2 million, with John taking home approximately $800,000 through a mix of salary and distributions from an S Corporation (S Corp).
But here’s the thing—this isn't a lifestyle business. John wants to grow and eventually sell. That changes everything from a tax planning perspective.
Key Results: $150,000+ in Immediate Savings in Taxes with C Corp & QSBS Strategy
Through strategic planning, we’re projecting:
$150,000 in income tax savings for 2025 alone
$400,000–$500,000+ in savings in future years as the business grows
Potential to sell the company with zero capital gains tax, thanks to Qualified Small Business Stock (QSBS) strategies
Let’s unpack the journey that led to these impressive savings in taxes with the C Corp & QSBS strategy.
Step 1: Choosing the Right Business Structure
Business entity structure has massive implications for tax planning. Let’s review the main types and why we made a change.
Here are some bonus articles we have written on this topic:
Bloomwood Guide - When does it make sense to convert an LLC or S-Corp to a C-Corp?Bloomwood Guide - Maximizing Capital Gains Exemptions with Qualified Small Business Stock
LLC (Limited Liability Company)
An LLC offers liability protection, but for tax purposes, it’s a pass-through entity. All income flows through to the owner’s personal tax return. While it allows you to deduct legitimate business expenses, the full net income is taxed at personal income tax rates—often 40% or more for high earners.
S Corporation (S Corp)
An S Corp helps owners reduce self-employment taxes by splitting compensation into salary (subject to FICA taxes) and distributions (not subject to FICA). This is a popular move for service-based or lifestyle businesses, offering moderate tax savings.
C Corporation (C Corp)
A C Corp is often feared for “double taxation”—once at the corporate level, and again when dividends are distributed. But here’s the trick: If the owner doesn't need to withdraw all profits and plans to reinvest a significant portion back into the business, the lower corporate tax rate (typically 21%) becomes a powerful advantage.
In John’s case, he didn’t need to take all profits home. By converting to a C Corp, he could leave money in the business and have it taxed at a lower rate—saving nearly $170,000 in year one.
Step 2: Leveraging Qualified Small Business Stock (QSBS)
One of the most underused tools in tax strategy is Qualified Small Business Stock, outlined under Section 1202 of the IRS Code.
What Is QSBS?
If a company qualifies and you hold stock for at least five years, you can sell the stock tax-free, avoiding capital gains on up to $10 million (or 10x basis, whichever is greater).
QSBS Requirements:
Must be a C Corporation
Company must operate in a qualified industry (software companies generally qualify)
Stock must be originally issued (not purchased on the secondary market)
Stock must be held for five years
We helped John convert his entity to a C Corp, and he now holds QSBS-eligible shares. If he sells after five years, he could potentially pay zero capital gains tax on the sale.
Why This Strategy Worked
John’s company was:
Highly profitable ($1M+ net income)
Not cash-hungry at the personal level (owner took less than full net income)
Poised for future sale (5+ year horizon)
Asset-light, making a stock sale more likely than an asset sale
This made him the perfect candidate for C Corp conversion and QSBS planning.
Final Thoughts: The Power of Integrated Planning
Each of these strategies—entity structuring, tax deferral, and QSBS—offer individual benefits. But when combined strategically, they can deliver game-changing results.
That’s why a holistic view of tax and business planning is critical. You don’t just want someone who knows one piece of the puzzle. You want a team that can see the big picture and assemble the optimal strategy for your goals.
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