Disclaimer: I am not an accountant, nor is my business set up as an S corp.
The way it works is this: you form an S corp, and as the owner you pay yourself dividends rather than straight income. That way you aren't taxed at normal income tax rates but instead at the capital gains rate. At the same time, because you are now an employee of the S corp you personally only pay half the social security tax, rather than the whole bit as you would as the owner of the LLC paying both the employer and employee portions (of course the corporation is still obligated to pay the employer contribution).
Accountants are of different minds on this, depending on their own taste for risk. The important question in an audit is being able to defend that the business is more than just you, IE: the income is legitimate dividends from the success of the business, and not just regular employment income masquerading as dividends. Again, consult an accountant - they really are worth the cost.