How the llc vs s corp calculator works
A single-member LLC is taxed like a sole proprietorship by default, so all profit pays self-employment tax. If the LLC elects S corporation status, the owner must take a reasonable salary through payroll, which pays the same 15.3% FICA, but the remaining profit can be taken as distributions without payroll tax.
S corp payroll tax = 15.3% × salary (employer + employee halves)
Savings = LLC SE tax − S corp payroll tax − extra costs
The salary must be reasonable for the work you do, judged by what similar businesses pay; the IRS can reclassify distributions as wages if it is too low. Extra costs include payroll software, a separate business tax return (Form 1120-S), state fees and unemployment taxes. The comparison ignores income tax effects such as the QBI deduction, which can shift slightly. Many advisers suggest an S corp starts to make sense somewhere around $50,000 to $80,000 of profit.
Worked example
With $120,000 of profit, an LLC pays about $16,955 of SE tax. As an S corp paying a $60,000 salary, payroll tax is $9,180. The difference is $7,775, and after $2,000 of extra costs the election saves about $5,775 a year.
Tax estimates use 2026 federal figures and simplified rules. They are not tax advice; check with a tax professional.
Frequently asked questions
When is an S corp worth it?
When the payroll tax saved on distributions is larger than the extra costs. That usually needs profit well above a reasonable salary.
What is a reasonable salary?
Pay comparable to what the business would pay someone else for the same work, considering duties, hours and industry.
Does an S corp save income tax?
Not directly. The main savings are payroll taxes on distributions.
Can an LLC be taxed as an S corp?
Yes. An LLC can elect S corp tax treatment while remaining an LLC under state law.
Updated October 2026. Results are estimates for education, not financial or medical advice. All math runs in your browser; nothing you type is sent anywhere.