LLC vs S-Corp: You Are Comparing
an Entity to a Tax Election
An LLC can elect to be taxed as an S-Corp. This site answers the only question that matters: does the election actually save you money?
"Your LLC does not become an S-Corp. It stays an LLC. The IRS just taxes it differently. That is the entire story."
Break-Even Calculator
Enter your net profit, state, and salary. Get your year-one verdict in seconds. Free. No email.
Typical Answers by Profile
The right answer depends on your income, state, and situation. See our full by-profession guide for nine profiles with worked numbers.
SE tax savings ~$5,400/yr. Clear above compliance cost in TX, FL, WA. Marginal in CA.
Net benefit ~$9,500/yr typical. SSTB phase-out may reduce QBI deduction above $191,950 single.
Net benefit $15,000-$25,000/yr depending on state. Compliance cost is 10% of savings.
LLC Default vs LLC-as-S-Corp: What Actually Changes
| Factor | LLC Default | LLC Taxed as S-Corp |
|---|---|---|
| Legal entity | LLC (unchanged) | LLC (unchanged) |
| Federal tax form | Schedule C or 1065 | Form 1120-S + K-1 |
| SE / FICA tax | 15.3% on all net profit | 15.3% on salary only |
| Distributions taxed? | Yes (as SE income) | No payroll tax on distributions |
| Reasonable salary required? | No | Yes (IRS audit risk) |
| QBI deduction eligible? | Full net profit | Distribution portion only |
| Liability protection | LLC veil | Same LLC veil |
| Form 2553 required? | No | Yes |
| Annual compliance cost | Low ($0-$500 bookkeeping) | Moderate ($1,800-$5,400/yr) |
| State entity tax | Usually none | CA $800+, NY minimum, TN F&E |
Teal = advantage for that column. Copper = disadvantage. Grey = identical.
What Most LLC vs S-Corp Content Won't Tell You
Most LLC vs S-Corp content is written by formation services (who profit from LLC formation fees), CPA firms (who profit from 1120-S preparation), or payroll providers (who profit from S-corp payroll). None of those parties have an incentive to tell you the election might not be worth it.
This site earns whether you elect or not. We cover the scenarios where the S-election is genuinely wrong: income below break-even, California's entity tax wipeout, QBI phase-out for high-income service owners, real estate portfolios, and VC-track businesses that need preferred stock.
Read: When NOT to Elect S-CorpExplore the Full Guide
The $40-$60k threshold with state overlay and decision tree.
IRS factors, Watson case, BLS OEWS methodology, audit triggers.
Deadlines, Rev Proc 2013-30 relief, the exact header language.
Step-by-step cost: LLC default to S-Corp, to C-Corp, and back.
CA, NY, TN, TX, NH, DC - the six states that change the answer.
Nine profiles with specific verdicts, income thresholds, and salary ranges.
Frequently Asked Questions
Is an LLC or S-Corp better for taxes?
Neither is 'better' in the abstract. An LLC is a legal entity; an S-Corp is a federal tax election your LLC can make by filing Form 2553. The real question is whether the SE tax savings exceed the compliance cost. Break-even is typically $40,000-$60,000 net profit, depending on your state and payroll costs. Use the calculator above for your specific numbers.
Does electing S-Corp change my liability protection?
No. Your liability protection comes entirely from your LLC entity under state law. The S-election only changes how the IRS taxes you. Your LLC name, state registration, operating agreement, and legal shield are all unchanged. What actually determines whether personal assets are exposed is whether you respect the corporate veil: separate bank accounts, no fund commingling, signed contracts in LLC name.
Can I still elect S-Corp if I missed the March 15 deadline?
Yes. Rev Proc 2013-30 provides automatic relief for late elections filed up to 3 years and 75 days after the desired effective date, if reasonable cause is documented and all shareholders have been reporting income consistently with S-Corp treatment. Write 'FILED PURSUANT TO REV PROC 2013-30' at the top of Form 2553 and attach a reasonable-cause statement. See the full mechanics at /election.
What is the 2026 Social Security wage base for S-Corp calculations?
The 2026 SS wage base is projected at $175,800 (SSA announcement). SE tax is 15.3% up to this amount and 2.9% Medicare-only above it. This cap affects S-Corp savings at high income levels: once your salary plus SE income exceeds $175,800, the marginal benefit of additional S-Corp distributions drops from 15.3% to 2.9%.