Calculate late payment fees on overdue invoices using flat fee, daily, monthly, or annual interest rates.
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A Texas-based freelance graphic designer earns $140,000 net profit/year from client work. She's evaluating whether to stay as a sole proprietor, form an LLC, or elect S-Corp status to reduce self-employment taxes.
Takeaway: S-Corp saves $8,300/year but adds ~$1,500-$3,000 in accounting fees (payroll, extra returns). Break-even is around $80-90K net profit. Below that, the overhead eats the savings. Texas has no state income tax, so the benefit is purely federal SE savings.
LLC annual fees range from $0 (Ohio) to $800 minimum (California, even for zero-revenue LLCs). Delaware C-Corp is standard for VC-backed companies but adds registered agent costs (~$300/yr) for out-of-state entities. The "best" structure is state-specific.
S-Corps cannot have more than 100 shareholders, cannot have non-US shareholders, and cannot have corporate shareholders. Violating these rules (e.g., adding a foreign investor) terminates S-Corp status retroactively, potentially creating a large unexpected tax event.
The IRS requires S-Corp owner-employees to pay themselves a "reasonable salary" before taking distributions. There is no fixed formula — the IRS looks at industry benchmarks, duties, and hours worked. Setting the salary too low is a common audit trigger for S-Corps.
Business break-even models track revenue vs. direct costs. They rarely factor in the owner's time as a cost. If you're working 60 hours/week at imputed $50/hour, your "profitable" business may be paying you $12/hour after the opportunity cost calculation.
Break-Even CalculatorA service business valued on EBITDA multiples (2-4×) gets a very different number than one valued on SDE (seller's discretionary earnings) or discounted cash flow. Buyers and sellers typically use different methods to argue their preferred price. This calculator uses a single method.
Business Valuation CalculatorBased on your inputs
Effective annual rate: 18.00%
| Invoice Amount | $1000.00 |
|---|---|
| Days Overdue | 30 days |
| Late Fee | $15.00 |
| Total Amount Owed | $1015.00 |
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Common late fees are 1.5% per month (18% APR) or a flat fee of $25–$50. Check your contract and local laws.
Yes, if stated in your contract or terms. Most states allow up to 10–18% annual interest on overdue commercial invoices.
Daily Interest = Invoice Amount × (Annual Rate / 365) × Days Overdue.
Yes. Always specify late fee terms in your contract or on your invoice to ensure they are legally enforceable.
Most states cap late fees at 10-18% annual interest for commercial transactions. Some states set specific maximum percentages or flat fee limits. Check your state's usury laws before setting late fee rates.
State the late fee rate, when it starts accruing, and calculation method. Example: 'A late fee of 1.5% per month will be applied to invoices unpaid after 30 days from the invoice date.'
Percentage fees scale with invoice size and are more common for large invoices. Flat fees ($25-$50) work better for small recurring invoices. Many businesses combine both: a flat fee plus daily interest.
Federal government contracts are covered by the Prompt Payment Act, which requires the government to pay interest on late payments at rates set by the Treasury Department. State and local rules vary.
Simple interest is calculated only on the original invoice amount. Compound interest adds unpaid interest to the principal. Most invoice late fees use simple interest. Compound interest may violate some state usury laws.
Send a professional email referencing the invoice number, original due date, outstanding amount, and applicable late fees. Include payment instructions and a deadline. Follow up by phone if the invoice remains unpaid after two written reminders.
Daily: Fee = Amount × (Rate% / 100) × Days
Monthly: Fee = Amount × (Rate% / 100) × (Days / 30)
Annual: Fee = Amount × (Rate% / 100) × (Days / 365)
Every formula on this page traces to a federal agency, central bank, or peer-reviewed institution. We cite the rule-makers, not secondhand blogs.
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Calculations are for educational purposes only. Consult a qualified financial advisor for personalized advice.