LLC vs S-Corp Calculator: Compare the Numbers.

An LLC (Limited Liability Company) is a legal business structure that protects its owners from personal liability. An S Corporation is a federal tax election, not a structure, that lets a corporation or LLC pass income through to owners. Many single-member LLCs elect S Corp status to potentially reduce self-employment tax.

It depends on net profit, your state, and how much of the income is paid as a reasonable W-2 salary. For many single-owner service businesses earning $60K–$200K net profit, an LLC taxed as an S Corp can save on self-employment tax, but only after subtracting S-Corp bookkeeping and payroll costs.

For a single owner with a comfortable W-2 salary relative to the remaining distribution, the S Corp election usually produces a lower federal self-employment tax bill. The 15.3% self-employment tax applies to 92.35% of net profit for an LLC, but only to the W-2 wages of an S-Corp owner-employee.

Both pay the same federal income tax on net earnings (the S-Corp net pass-through income is taxed at ordinary rates on the owner's return). The difference is in the payroll / self-employment tax layer — the 15.3% SE / FICA tax.

The comparison calculates the LLC's Schedule SE self-employment tax (15.3% on 92.35% of net profit) and the S-Corp's employer-side FICA on the proposed owner salary (12.4% Social Security up to the wage base, plus 2.9% Medicare). The difference, minus state fees and admin overhead, is the modeled benefit.

Yes. A domestic LLC can elect S Corp status by filing IRS Form 2553. The election is generally effective for the tax year in which it is filed and all subsequent years until revoked. State tax treatment may differ from federal treatment.

An LLC owner pays self-employment tax on net earnings (15.3% on 92.35% of net profit, with the 12.4% Social Security portion capped at the annual wage base). An S-Corp owner-employee pays FICA only on the W-2 salary, not on the remaining distribution.

Often yes, for owners whose net profit is significantly higher than a reasonable W-2 salary. The savings come from the distribution escaping the 15.3% payroll / SE layer. The IRS requires the salary to be reasonable, so the strategy stops working if you underpay yourself.

Higher profit can make an S-Corp election more attractive when the payroll-tax savings exceed the additional administrative and state costs. There is no single fixed profit threshold; the right answer depends on your net profit, your reasonable salary, and your state.

There is no single IRS-defined threshold. The savings turn positive when the difference between LLC self-employment tax and the S-Corp employer's half of FICA on a reasonable salary exceeds the cost of running the S-Corp. The actual break-even depends on your state, your reasonable salary, and the additional administrative overhead.

An S-Corp owner-employee must take a W-2 salary that the IRS considers reasonable for the services performed. The remaining profit can be taken as a distribution. Reasonable compensation is fact-specific. The IRS does not publish a percentage or formula; the appropriate salary depends on the owner's duties, experience, industry, and other facts.

Yes. A single-member LLC can file IRS Form 2553 to elect S Corp federal tax treatment. Many small-business owners use this path: the LLC keeps the state's liability-protection benefits, while the federal tax side mirrors an S Corporation.

LLC pros: simple tax filing, flexible profit allocation, no required salary. LLC cons: full net profit subject to 15.3% SE tax. S-Corp pros: distribution escapes SE tax. S-Corp cons: payroll required, must run a reasonable salary, additional bookkeeping, possible state-level franchise tax.

For many solo service-business owners, an LLC with an S-Corp election is the most tax-efficient structure once profits justify the extra cost. It depends on state, reasonable salary, and other income. Run your numbers with the calculator above to compare.

Use the BizTaxMetrics calculator. Enter your expected net profit and the W-2 salary you would pay yourself under an S-Corp election. The calculator shows the LLC self-employment tax, the S-Corp FICA, and the resulting federal payroll tax difference — adjusted for your state's annual fees.

Yes. The BizTaxMetrics calculator above compares LLC self-employment tax and S-Corp FICA at any profit and salary level, then subtracts state fees and bookkeeping overhead to estimate the net modeled benefit.

The federal math matches IRS Schedule SE and Form 941 to the cent. State fees are pulled from each Secretary of State's published schedule. The calculator explicitly does not model federal income tax, state income tax, QBI, the self-employed health insurance deduction, or retirement contributions.

You need your expected annual net profit, a reasonable W-2 salary for the work you perform, and your state. Optional inputs include any other W-2 wages you already receive, which can change your Additional Medicare Tax exposure under IRS Form 8959.

An S Corporation is a corporation — a separate legal entity that generally shields shareholders from business liabilities. An LLC also provides liability protection. Many small-business owners use an LLC taxed as an S Corp to combine both.

Yes. A single-member LLC can file IRS Form 2553 to elect S Corp tax treatment prospectively. The election is generally effective for the tax year in which it is filed. State-level requirements may add a separate filing.

The savings equal the LLC's self-employment tax minus the S-Corp's employer-side FICA on the W-2 salary, less state fees and added admin cost. As an example, $100,000 net profit with a $50,000 reasonable salary yields roughly $10,000 of federal payroll savings in our 2026 model before admin overhead. Actual savings depend on your profit, salary, state fees, and bookkeeping cost — run your numbers in the calculator above.

Pass-through taxation means the entity itself does not pay federal income tax; profits and losses flow through to the owner's personal return and are taxed at individual rates. Both the default LLC and an S Corp are pass-through entities for federal purposes. A C corporation is the main exception — its profits are taxed at the entity level, and shareholders pay a second layer of tax on dividends.

No. By default, the IRS treats a single-member LLC as a disregarded entity (sole proprietor) and a multi-member LLC as a partnership. To be taxed as an S Corp, the LLC must affirmatively elect S Corp status by filing IRS Form 2553. Without the election, the LLC keeps its default federal tax treatment.

The IRS requires a reasonable W-2 salary for any owner who performs services. There is no fixed formula — the salary must reflect what you would pay someone else to do the same work. Setting it too low risks IRS reclassification of distributions as wages, triggering back taxes and penalties. See our full guide on reasonable salary for S Corp owners for industry benchmarks and strategies.

S-Corp disadvantages include: a W-2 salary is required for any owner who performs services, with the IRS treating an unreasonably low salary as a distribution; more administrative work (payroll, Form 1120-S, separate bookkeeping); stricter ownership rules (U.S. citizens / residents only, one class of stock, a 100-shareholder cap); and possible state-level franchise tax or General Corporation Tax on top of federal pass-through treatment.

Eligible S-Corp shareholders are limited to U.S. citizens, U.S. residents, certain trusts, and certain exempt organizations. Partnerships, most corporations, and nonresident aliens generally cannot be shareholders, and an S Corp may have no more than 100 shareholders. S Corps may issue only one class of stock (differences in voting rights within that single class are allowed).

Yes. Revocation requires consent of shareholders owning more than 50% of shares and is filed with the IRS. Once revoked, the entity defaults to C Corp taxation. You generally cannot re-elect S Corp status for 5 years without IRS permission. See our S Corp vs C Corp comparison for details on the conversion process.

Both LLCs (default pass-through) and S Corps are eligible for the Section 199A qualified business income deduction. Section 199A imposes a separate W-2 wage and UBIA limit that can phase out the deduction at higher income. For some service businesses (consulting, law, accounting, health) the limit binds earlier for an S Corp because the owner salary already counts as W-2 wages, while for a disallowed LLC the owner's compensation does not. The One Big Beautiful Bill Act (H.R. 1, signed July 4, 2025) made §199A permanent and expanded the 2026 phase-in range to $201,750–$276,750 (single) and $403,500–$553,500 (MFJ), per IRS Rev. Proc. 2025-32. The calculator surfaces the S-Corp W-2 drag from QBI as an optional toggle — use it to see the income-tax cost of moving salary out of the §199A base. The interaction is fact-specific — a CPA can model whether QBI delivers more after an S-Corp election than a simpler LLC.

A sole proprietor and a single-member LLC (default treatment) reach the same federal tax result — Schedule C with self-employment tax on 92.35% of net earnings. The LLC adds liability protection and adds no federal tax when defaulted. The S-Corp election only becomes worth it once the LLC's payroll-tax savings exceed the added cost, generally once net profit reliably outpaces a defensible reasonable salary year over year.

Texas, Florida, and Wyoming are popular S-Corp destinations because they have no state personal income tax and only a small annual franchise / report fee, so nearly all of the federal payroll-tax savings flows through. Many no-income-tax states still charge a small annual report fee; check each Secretary of State's published schedule. Relocating solely to escape taxes usually fails — most states tax income earned while you lived or worked there.

Federal income tax is the same on both structures — pass-through income is taxed at the owner's ordinary rates either way. The LLC vs S-Corp decision moves only one line of the federal return: the 15.3% self-employment / FICA layer, which an S Corp partially avoids on distributions via a reasonable W-2 salary. State taxes can also differ, especially where one structure triggers a state franchise or General Corporation Tax.

Most small S-Corp owners spend roughly $1,000–$3,000 per year combined on a payroll provider, a bookkeeper, and additional tax preparation beyond what a default LLC requires. The figure varies with state, payroll frequency, and whether you use a CPA or a DIY bookkeeper. The BizTaxMetrics calculator models this as a configurable $0–$6,000 admin overhead so you can adjust it to your real cost.

An S Corp files Form 1120-S (the partnership-style pass-through return) and issues each shareholder a Schedule K-1 reporting their share of income, deductions, and credits. The owner-employee's W-2 and the wage / payroll filings (Form 941, state withholding) continue throughout the year. The owner's K-1 income is then reported on the personal return, alongside the W-2 wages.

Yes — service businesses (consulting, design, freelancers, coaches) often have the cleanest case for the S-Corp election because the owner's labor is the product and the W-2 salary maps neatly to market rates. The same IRS reasonable-compensation rules apply, so set the salary at what you would pay a comparable employee — not at a strategic minimum.

Sometimes, but with caveats. An S Corp requires pro-rata distributions (each owner must receive distributions in proportion to ownership), so an LLC with non-pro-rata profit allocations or special allocation language usually should not elect. The 100-shareholder cap and the U.S.-citizen / resident shareholder rule also matter once you add owners. Multiparty LLCs are commonly operated as partnerships for that reason.

A new LLC must file IRS Form 2553 by the 75th day of the tax year the election is to take effect to be retroactive to the start of the year. Late-election relief is available under Rev. Proc. 2013-30 for entities that miss the deadline, with a streamlined process. States generally have a parallel filing window — California, New York, and other states accept the federal election but require their own form.