Compare S-Corp vs LLC tax treatment. Calculate potential SE tax savings from electing S-Corp status for your business.
💡 Salary should be 30–60% of net profit or market rate for your role, whichever is higher.
✓ S-Corp is worth it
| Net Business Profit | $100,000 |
| LLC Self-Employment Tax | $14,130 |
| S-Corp Owner Salary | $50,000 |
| S-Corp Distributions (no SE tax) | $46,175 |
| S-Corp Total Payroll Tax | $7,650 |
| Gross Tax Savings | $6,480 |
| S-Corp Annual Costs | -$2,000 |
| NET SAVINGS | $4,480 |
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LLC SE Tax = Net Profit × 92.35% × 15.3%
S-Corp Payroll Tax = Salary × 15.3%
Net Savings = LLC SE Tax − S-Corp Payroll − Annual Costs
Generally when net profit exceeds $40,000–$50,000/year. The SE tax savings need to outweigh the added costs (payroll, extra accounting fees ~$1,000–$2,500/yr).
As an LLC, all net profit is subject to 15.3% SE tax. With S-Corp, you pay yourself a 'reasonable salary' (subject to payroll taxes), then take remaining profit as distributions (NOT subject to SE tax).
The IRS requires S-Corp owners to pay themselves a reasonable salary for services rendered. Typically 30–60% of net profit, comparable to market rate for your role.
Additional costs: payroll setup, payroll tax filings, state S-Corp fees, extra accounting. Must have a separate payroll. Some states don't recognize S-Corps or charge extra fees (CA: $800 minimum franchise tax).
Calculations are for educational purposes only. Consult a qualified financial advisor for personalized advice.