LLC vs S Corp. Numbers, not narrative.

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.

A common rule of thumb is once net profit consistently exceeds roughly $60K–$80K (after a reasonable W-2 salary) and after subtracting the additional bookkeeping and payroll-service cost. Below that, the extra administrative overhead often wipes out the savings.

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 — typically $80K+ in net profit for a service business in a low-fee state, lower in some states and higher in higher-fee ones.

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; common ranges are 30%–60% of net profit for service businesses.

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.