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LLC vs S-Corp: Side-by-Side Comparison

The single biggest tax decision most small business owners make is whether to stay a default LLC or elect S-Corp status. The difference comes down to self-employment tax: a sole proprietor or single-member LLC pays 15.3% SE tax on 92.35% of profit (up to the Social Security wage base for the 12.4% part), while an S-Corp owner pays payroll tax on a reasonable salary, and distributions above that aren't subject to it. Here is how they compare on the factors that actually matter.

Business Entity Comparison

See how each entity type affects your taxes at your income level

$100,000
$50K$500K
FeatureSole PropLLC (Single)S-CorpC-Corp
Formation cost$0$300-$500$300-$500 + S election$300-$500 + articles
Liability protection
Self-employment taxFull SE taxFull SE taxOn salary onlyNo SE tax (payroll tax)
Pass-through taxation
Reasonable salary required
QBI deduction eligible
Annual compliance burdenMinimalLowMediumHigh
Best for income rangeUnder $50KUnder $50KDepends on profit, salary and costs$500K+ (reinvest)
Estimated SE Tax$14,130$14,130$9,945$7,650
Estimated Total Tax$22,365$22,365$20,700$28,650
Savings vs Sole Prop$0$0$4,185N/A (double tax)
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The Bottom Line

There's no single break-even number. It depends on your profit, the salary you can defend and what the S-Corp costs to run. At lower profit, payroll and the extra return can cost more than the payroll-tax difference. Try your numbers in the calculator, then talk it through with Krystal.

Try the S-Corp calculatorTalk it through with a CPA

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