I am not an accountant, but I do have a good understanding of this concept.

It works like this. If you are self employed there is a slef employment tax on all your income of 15%. This essentially goes toward social security and Medicare.

So let's say you make $100k in profit that means it's $15k in self employment tax.

If you instead become and LLC and file as an S-Corp then self employment tax goes away and is replaced with social security and Medicare on "wages" only. The company then pays you a "reasonable wage" of let's say $30k in this case, and then pays the other $70k out to you as "dividends". The $30k is subject to social security and Medicare which comes to a little under 15% with all things considered (~$4500) and the dividends are not.

This creates a rough tax savings of $10,500.

(Talk to your accountant for exact numbers and advice for your situation, this is just the basic concept.)

Here are some more resources on the subject:

https://turbotax.intuit.com/tax-tools/tax-tips/Small-Business-Taxes/How-an-S-Corp-Can-Reduce-Your-Self-Employment-Taxes/INF22938.html
http://www.incorporatecalifornia.com/scorptaxes.html