In Short
As an LLC taxed as a sole proprietorship, all profit pays 15.3% self-employment tax. As an S-Corp, only the owner's salary pays payroll tax, and the rest passes through free of it [1][2]. On $100,000 of profit with a $50,000 salary and $2,000 of extra costs, a single owner in Texas pays about $19,595 as an S-Corp instead of $22,365 as an LLC for 2026, about $2,770 less. The salary has to be reasonable for the work [3].
How to Use the LLC vs S-Corp Calculator
- Enter your business's net profit before paying yourself.
- Enter the salary the S-Corp would pay you. Start from what the business would pay someone else to do your job.
- Pick your filing status and state, and adjust the S-Corp's extra yearly costs.
- Or tap Say It All: “My LLC makes 120k in profit in Florida, single, I'd pay myself a 60,000 salary and payroll costs would be 2,000.”
- Compare the two totals, and check the breakeven profit at your salary share.
The Formula
Both sides pay income tax on all profit. The difference is which part pays Social Security and Medicare, the smaller QBI deduction on the S-Corp side, and the cost of running payroll.
- LLC payroll tax = profit × 92.35% × 15.3% (12.4% up to the wage base)
- S-Corp payroll tax = salary × 7.65% (employee) + salary × 7.65% (employer)
- S-Corp pass-through profit = profit − salary − employer FICA − extra costs
- QBI deduction = 20% of business profit: all profit (less ½ SE tax) for the LLC, pass-through profit only for the S-Corp
- Savings = LLC total tax − (S-Corp total tax + extra costs)
Worked Examples
| Scenario | Inputs | Result |
|---|---|---|
| $100,000 profit, $50,000 salary | $2,000 extra costs, single, Texas | LLC $22,365 · S-Corp $19,595 · saves about $2,770 a year |
| $60,000 profit, $30,000 salary | $2,000 extra costs, single, Texas | LLC $12,037 · S-Corp $10,478 · saves about $1,560 a year |
| $150,000 profit, $70,000 salary | $2,500 extra costs, single, Texas | Payroll tax $10,484 lower, QBI $10,232 smaller · saves about $5,012 a year |
| $40,000 profit, $20,000 salary | $2,000 extra costs, single, Texas | LLC $7,427 · S-Corp $6,861 · saves about $566, before costs the model leaves out |
Illustrative examples, not projections. Figures use the tax year shown and the assumptions above.
How Does an S-Corp Save on Taxes?
An S-Corp is a tax election, not a different kind of company: an LLC can file Form 2553 to be taxed as an S corporation [4]. The business then pays you a salary through payroll, with Social Security and Medicare withheld and matched: 7.65% from you and 7.65% from the business [6]. Profit above the salary passes through to you on a K-1 and is subject to income tax, but not to payroll tax [1].
As a sole proprietor, every dollar of profit pays self-employment tax [5]. The S-Corp saving is the payroll tax on the profit above your salary, minus what the election costs to run.
What Is a Reasonable Salary for an S-Corp Owner?
The IRS requires an S-Corp to pay a shareholder who works in the business reasonable compensation before taking other distributions [3]. There is no set percentage. The IRS looks at what the owner does, where the company's revenue comes from, time spent, training and experience, and what comparable businesses pay for similar work [3].
A salary set low just to cut payroll tax can be reclassified as wages, with back taxes and penalties. Many owners start the comparison at 40% to 60% of profit, but the work you do sets the number, not the tax result.
At What Profit Does an S-Corp Make Sense?
In this model, with $2,000 of extra costs, a single owner in Texas starts saving at about $30,000 of profit with a 50% salary, and about $44,000 with a 60% salary. Costs the model leaves out, such as state unemployment insurance, more bookkeeping and the owner's time, push the practical crossover higher. That is why $40,000 to $60,000 of profit is a common point to start comparing.
The S-Corp also has a cost the payroll saving doesn't show: a smaller QBI deduction, because the salary doesn't count as qualified business income [2]. The calculator includes it. This is an educational comparison; the right choice depends on your whole situation.
Frequently Asked Questions
How much can an S-Corp save on $100,000 of profit?
In this model, a single owner in Texas with a $50,000 salary and $2,000 of extra costs saves about $2,770 a year in 2026. A higher salary or higher costs shrinks the saving.
Is an LLC or S-Corp better for taxes?
Neither is better in general. An LLC taxed as a sole proprietorship is simpler; an S-Corp election can lower payroll tax once profit is well above a reasonable salary, after the cost of payroll and an extra return [1][4].
Can my LLC be taxed as an S-Corp?
Yes. An eligible LLC files Form 2553 to elect S-corporation tax treatment, usually within 2 months and 15 days of the start of the tax year it applies to [4].
What are the extra costs of an S-Corp?
Running payroll (a service or software), filing Form 1120-S and the K-1 each year, state unemployment insurance and, in some states, extra fees or taxes. The calculator uses about $2,000 a year by default; change it to your quotes.
Does the S-Corp election change the QBI deduction?
Yes. Your salary isn't qualified business income, so the QBI deduction is figured on the pass-through profit only and is usually smaller than as a sole proprietor [2].
Sources
- S corporations — Internal Revenue Service
- Qualified business income deduction — Internal Revenue Service
- S corporation compensation and medical insurance issues (reasonable compensation) — Internal Revenue Service
- About Form 2553, Election by a Small Business Corporation — Internal Revenue Service
- Self-Employment Tax (Social Security and Medicare Taxes) — Internal Revenue Service
- Topic no. 751, Social Security and Medicare withholding rates — Internal Revenue Service
Official sources only: the IRS, SSA, BLS and other government agencies. Read how Zentavos researches.