S-Corp vs LLC: Which Saves More on Taxes?

The S-Corp Tax Advantage

One of the biggest advantages of an S-Corp is the ability to split income between salary and distributions. Only the salary portion is subject to self-employment tax (15.3%), potentially saving thousands.

When Does S-Corp Make Sense?

Generally, once your net business income exceeds $50,000-$60,000, the S-Corp election starts saving money. Below that threshold, the additional filing costs and payroll requirements may not be worth it.

LLC Default Taxation

A single-member LLC is taxed as a sole proprietorship by default. All net income is subject to both income tax and self-employment tax. This simplicity has a cost at higher income levels.

State Variations

Some states, like California, charge an additional franchise tax on S-Corps ($800 minimum). Factor in state-specific rules when making your decision. Use our calculator to see exact numbers for your state.