How Formations Is Bringing S-Corp Tax Savings to the Self-Employed
Formations is on a mission to democratize one of corporate America's best-kept secrets: the S-corp. It’s a structure that over 55% of US businesses use to maximize their tax savings but that less than 10% of self-employed individuals have adopted.
The brainchild of Shahar Plinner, a tax expert with over 20 years of experience, Formations launched in March 2020 with a bold vision. The company set out to create a single platform that orchestrates all five pillars of S-corp management—bookkeeping, tax expertise, payroll, entity management, and benefits—into one seamless experience for business owners who've chosen independence over the corporate ladder.
According to Uri Bar-Joseph, co-founder and chief product officer (CPO) at Formations, the company takes a prescriptive approach that eliminates the complexity traditionally associated with S-corp management. For businesses of one, this approach also delivers tax savings that many never knew were possible.
"The amount of tax savings is just unbelievable," he said. "People literally don't believe it, despite every evidence to the contrary."
Creating a Unified Experience Without Overwhelming Users
To deliver on their promise of simplified S-corp management, Formations needed accounting infrastructure that could power automatic categorization, support separate views for customers and bookkeepers, and integrate seamlessly with their orchestration layer.
After launching their MVP with Xero, Formations quickly hit technical limitations. Xero’s lack of API-first architecture meant they couldn't deliver the automatic categorization and unified customer experience central to their vision. Then, shortcuts that worked at a small scale began breaking as the company grew.
"There are technical limitations that are by design from Xero that we just could not overcome. As we started to scale our business, those workarounds started to break."
– Uri Bar-Joseph, Co-Founder and CPO, Formations
The team needed a partner who could provide robust APIs, support their unique dual-interface approach (simplified for customers, comprehensive for bookkeepers), and play well with other technologies in their stack—including Gusto for payroll.
"We are the orchestration layer, so any player within that orchestration needs to be part of the orchestra,” said Bar-Joseph.
Equally important, Formations needed a partner willing to collaborate on building features specific to their use case.
An API-First Partnership That Evolves With the Business
When Formations discovered Tight through a mutual partner, the alignment was immediate. During their first demo with Tight's co-founder, the team experienced an a-ha moment.
"Everything he showed us was like, 'Oh yeah, this is what we need.' It was almost like, wait, you built everything that we built and more. And you say that we can use it to serve our customers? The answer was, ‘absolutely.’"
– Uri Bar-Joseph, Co-Founder and CPO, Formations
Tight's API-first approach allowed Formations to create exactly the experience they envisioned:
- Custom UI layer: Using Tight's white-label capabilities, Formations ensures customers see only the Formations brand and interface, with no exposure to the complex underlying technology.
- Dual-view architecture: Formations customers get a simplified view focused on essential tasks, while bookkeepers can access Tight's full professional interface.
- Threaded conversations: A unique commenting system allows customers and bookkeepers to communicate directly on specific transactions.
- Rules management: An innovative workflow enables customers to request categorization rules that bookkeepers review and approve.
Formations' partnership with Tight extended beyond basic integration. When Formations needed specific functionality, Tight built it into their roadmap. "It was essentially joint development," explains Bar-Joseph. "We'd say, 'This is the business requirement. We can do it this way now, but it would be much easier if you could build it differently.' And Tight would say, 'Great, we're going to put it in our roadmap and build it.'"
Dramatic Efficiency Gains and Accelerated Innovation
Tight has transformed Formations' operational efficiency and customer experience, including:
- 10-15% efficiency uplift: Backend operations have improved dramatically through automation and reduced manual intervention.
- 5% COGS reduction: Despite Tight costing more than their previous solution, the efficiency gains have delivered net cost savings through reduced staffing needs and less customer back-and-forth.
- Self-serve capabilities: Formations customers can now manage their banking independently, eliminating the need for scheduled meetings while maintaining privacy and security.
- Accelerated feature velocity: New features launch more quickly using Tight's APIs, enabling continuous innovation for customers.
- Seamless migration: Formations successfully moved nearly all customers from Xero to their new Tight-powered infrastructure.
Perhaps most importantly, the partnership has enabled Formations to stay lean while scaling. Their fulfillment team—including CPAs, bookkeepers, and QA specialists—can manage a growing customer base without proportional headcount increases.
"We're able to launch new features more quickly with Tight’s API. The ability to innovate on behalf of our customers has been huge."
– Uri Bar-Joseph, Co-Founder and CPO, Formations
Deepening Integration to Transform Self-Employment
Formations sees Tight as fundamental to their continued growth and innovation. The companies are already collaborating on new initiatives, including a service that combines Tight's technology with human expertise—a perfect embodiment of Formations' software-plus-service approach.
As Formations continues its mission to bring S-corp benefits to the 90% of self-employed Americans who haven't yet adopted the structure, Tight's flexible, collaborative approach ensures the technology foundation can evolve alongside the business.
"Tight is our ledger technology. We continue to deepen our integration and relationship to both scale the business and bring new capabilities to our customers. We believe in this relationship and in this partnership beyond just the tech."
– Uri Bar-Joseph, Co-Founder and CPO, Formations
For the millions of self-employed Americans leaving tax savings on the table, Formations and Tight are building the bridge to better financial outcomes—one automated categorization, simplified interface, and tax-saving S-corp at a time.
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