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HomeLegal & BusinessMarkup Calculator

Markup Calculator

Calculate markup percentage, selling price, and gross profit margin from cost or price inputs.

Auto-updated May 12, 2026 · Verified daily against IRS, Fed & Treasury sources

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Markup Calculator

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Real-world example: Freelancer deciding between LLC and S-Corp▾

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.

  • Net business profit: $140,000
  • Sole prop SE tax (15.3%): ~$19,800
  • S-Corp reasonable salary: $75,000
  • SE tax on salary portion: ~$11,475
  • S-Corp distribution (no SE tax): $65,000
Annual SE tax savings via S-Corp
~$8,300/yr

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.

When this calculator is wrong▾
  • Entity structure recommendations depend on state law

    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-Corp election has eligibility requirements

    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.

  • Reasonable compensation determination is subjective

    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.

  • Break-even calculations exclude time cost

    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 Calculator
  • Business valuation methods produce different results

    A 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 Calculator

Related Calculators

AI Savings Calculator →Break-Even Calculator →Business Expense Tracker →
Your Results

Based on your inputs

ℹ️Demo numbers — replace inputs to see yours
Markup Percentage
40.00%positive

on cost

Selling Price$70.00
Profit per Unit$20.00
Markup %40.00%
Gross Margin %28.57%

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Markup is profit divided by cost. Margin is profit divided by selling price. A 50% markup on $10 cost = $15 price; the margin is 33%.

Retail typically uses 50–100% markup. Restaurants use 200–400%. Services range widely. Factor in overhead and competition.

Selling Price = Cost × (1 + Markup%). For a 40% markup on $25: $25 × 1.40 = $35.

Markup % = (Profit / Cost) × 100. Margin % = (Profit / Price) × 100. They are related but not the same.

Margin = Markup / (1 + Markup). A 50% markup equals 33.3% margin. A 100% markup equals 50% margin. Margin is always lower than markup for the same product.

Restaurants typically mark up food 200-400% (3-5x cost). Beverages are marked up 300-500%. A dish costing $5 in ingredients sells for $15-$25. This covers labor, rent, utilities, and profit.

Keystone pricing is a 100% markup (doubling the wholesale cost). A $25 wholesale item sells for $50 retail. It is a simple rule of thumb commonly used in retail, though many products require higher or lower markups.

Cost = Selling Price x (1 - Margin%). For a $100 product with 40% margin: Cost = $100 x (1 - 0.40) = $60. The profit is $40 and the markup is 66.7%.

Margin is better for financial analysis since it shows profit as a percentage of revenue. Markup is easier for setting prices from cost. Use both: calculate markup for pricing and track margin for profitability.

Determine your fully loaded hourly cost including salary, benefits, overhead, and taxes. Apply your desired markup percentage to set the billing rate. Service businesses typically use 50-150% markup to cover indirect costs and profit.

Markup % = (Selling Price − Cost) / Cost × 100

Margin % = (Selling Price − Cost) / Selling Price × 100

Selling Price = Cost × (1 + Markup%)

Published byJere Salmisto· Founder, CalcFiReviewed byCalcFi EditorialEditorial standardsMethodologyLast updated May 13, 2026

Primary sources & authoritative references

Every formula on this page traces to a federal agency, central bank, or peer-reviewed institution. We cite the rule-makers, not secondhand blogs.

  • USA.gov — Money and consumer protection — U.S. General Services Administration (opens in new tab)

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Calculations are for educational purposes only. Consult a qualified financial advisor for personalized advice.