Web Developer and IT Consultant Business Structure: S-Corp, SSTB Status, and the QBI Question
Web developers, software engineers, and IT professionals face a classification question under IRC 199A: is the business a specified service trade or business (SSTB)? The answer depends on what the business actually does. “Consulting” is explicitly listed as an SSTB. Writing code, building websites, managing servers, and developing software products are NOT consulting and are NOT SSTBs.
NOT an SSTB (full QBI available at any income level):
- Building websites, web applications, or mobile apps for clients (product creation, not advice)
- Software development and engineering services
- IT infrastructure setup, network installation, hardware deployment
- Managed IT services (ongoing maintenance, monitoring, support)
- SaaS product development and sales
SSTB (QBI phases out above $276,750 single / $553,500 MFJ under OBBBA):
- IT consulting (advising on technology strategy, system selection, vendor evaluation)
- Technology advisory services
- CTO-as-a-service or fractional CTO roles
Gray zone (depends on the engagement structure):
- “Full-stack development” engagements that include strategic consulting alongside coding
- Digital agency work that combines strategy, consulting, and execution
The classification is determined by the primary nature of the services rendered, not the job title. A “web consultant” who actually builds websites is not an SSTB. An “IT solutions provider” who primarily advises clients on technology strategy IS an SSTB.
When does the S-Corp election make sense for a developer?
Web developers and IT professionals typically have low overhead (a computer, internet, and software subscriptions), which means a high percentage of revenue becomes net profit. For current guidance, see IRS business structures overview. This makes the S-Corp election particularly valuable because there is a large spread between salary and total earnings.
What’s the reasonable salary for a web developer?
The IRS expects S-Corp owners to pay themselves a “reasonable salary” based on what an equivalent employee would earn. For web developers and IT professionals, the BLS (Bureau of Labor Statistics) and salary surveys provide benchmarks:
- Junior web developer: $50,000-$70,000
- Mid-level full-stack developer: $75,000-$100,000
- Senior developer / architect: $100,000-$140,000
- IT support / help desk: $40,000-$55,000
- Systems administrator: $60,000-$85,000
The salary should reflect the owner’s skill level, geographic market, and the work performed. A senior developer earning $200,000 in total compensation who sets a salary at $40,000 is taking an unreasonable position. A salary of $90,000-$110,000 would be more defensible.
Related guides:
Does my state recognize the same entity structure as the IRS?
Not always. The IRS recognizes entity elections (S-Corp, partnership, disregarded entity) at the federal level, but each state has its own rules. Some states do not recognize S-Corp elections and tax the entity as a C-Corp at the state level (New Hampshire and Tennessee historically). Others impose minimum franchise taxes or gross receipts taxes regardless of entity type. California charges an $800 minimum franchise tax on LLCs and S-Corps. Texas imposes a franchise (margin) tax on entities above a revenue threshold. Check your state’s treatment before assuming federal entity election flows through.
What happens to my business if I die without a succession plan?
Without a succession plan, your business’s fate depends on its legal structure. A sole proprietorship has no legal existence apart from you and simply ceases to exist. A single-member LLC’s operating agreement may or may not grant transfer rights to your estate. If it is silent, state default rules apply, and most states allow the interest to pass but not management rights, leaving the estate with an economic interest it cannot control. An S-Corp’s shares pass through the estate, but if the heir is an ineligible S-Corp shareholder (a nonresident alien, for example), the election terminates retroactively. A buy-sell agreement funded by life insurance is the standard solution: the policy pays out at death, and the agreement dictates who buys the interest and at what price.
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Yarik Yarosh, CPA. "Web Developer and IT Consultant Business Structure: S-Corp, SSTB Status, and the QBI Question." Blue Cloud CPA, September 5, 2026. https://bluecloudcpa.com/guides/web-development-entity-structure-scorp
This guide is general information, not tax advice for your specific situation. Which points apply, and how, depends on your facts.