Let's say you earn $72,000 per year as a self-employed small business owner. There's no reason why you can't convert your business from a sole proprietorship to a corporation, pay yourself $1,000 per month in salary, then distribute the remaining $60,000 to yourself in the form of dividends.
Dividends are subject to income taxes at your applicable tax rate, but they are not subject to payroll taxes.
If you Freep-mail me and let me know what kind of business you are in, I may be able to offer a few more general tips.
I am incorporated and The part your missing is that the $60,000.00 is profit to the corporation and the Corp. pays corporate tax on ANY profits, divedends are AFTER TAX....i'm not exactly sure what the applicable rate is for 60,000 but let's say it is 25%. After taxes the corporation only has $45,000.oo left for divedends. Then I pay INCOME TAX on the 45,000.00. I would be better off to take the $60,000.00 in payroll and pay 7.65% SS and let the corp. pay the matching for a total of 15% SS, thus saving approx. 10% in tax. Plus the Corp shows 0 income and pays no tax.