S-Corp vs LLC
Profit + reasonable-comp split → side-by-side comparison of self-employment tax savings under an S-Corp election.
Free · No signup · Directional estimate only
How the S-Corp vs LLC comparison works
A default LLC passes all of its profit to you as self-employment income, which is subject to 15.3% self-employment tax on top of income tax. Electing S-Corp status lets you split that profit into a reasonable salary (subject to payroll tax) and distributions (not subject to self-employment tax) — which is where the savings come from.
This tool models that split at your income level and shows the break-even point where the S-Corp savings start to outweigh the added cost of payroll and a separate return. Below that threshold, an S-Corp usually is not worth the overhead.
Frequently asked
- When does an S-Corp make sense?
- Generally once net profit is high enough that self-employment-tax savings exceed the cost of running payroll and filing a separate 1120-S — often somewhere around $40k–$80k of net profit, depending on your situation.
- What is a 'reasonable salary'?
- The IRS requires S-Corp owners to pay themselves a reasonable wage for the work they do before taking distributions. Set it too low and you invite audit risk; the calculator uses a defensible split as a starting point.
- What are the downsides?
- An S-Corp adds payroll administration, a separate tax return, and stricter compliance. Those costs are real — which is exactly why the break-even matters.