No games. If your normal salary is $100,000 and you want to distribute $1,000,000, that's where this comes into play. And the limit is only on a portion of the FICA taxes (it's actually $100k).
More clearly, the business pays social security tax of 6.2% of each of its employees' salaries up to $100k and medicare tax of 1.45% of each of its employees' salaries with no limit. So, if you take $1,000,000 from the business in a year and $100,000 is your normal salary, Then the business would pay $20,700 in FICA tax under an LLC and $7,650 under an S-Corp.
Conceded. If you're taking a 100k W2 and disbursing $1MM, the S Corp avoids the uncapped 1.4% Medicare tax. If you're taking a $1MM distro, you've got an accountant, and I'm not worried about you getting audited.
If you're most people and you try to split your salary $50k/$50k to avoid FICA on the distro half, I am worried about you getting audited --- not worth it.
Also, lest anyone be overly optimistic, the numbers timae is giving are the business' half of FICA; each shareholder makes up the other half. FICA isn't ~7%, it's ~15%.
