Is an LLC the same thing as an S Corp?

No. An LLC is a legal entity created under state law. S corporation status is a federal tax election that an eligible LLC or corporation can make.

What counts as a reasonable salary?

The IRS considers factors such as training, experience, duties, time devoted to the business, payments to other employees, and what comparable businesses pay for similar work. There is no universal percentage that automatically qualifies.

When is an S Corp election due?

Form 2553 is generally due no later than two months and 15 days after the beginning of the tax year when the election should take effect. Late election relief may be available in some situations.

Does an S Corp provide more liability protection than an LLC?

S corporation status is mainly a tax classification and does not by itself create a new layer of liability protection. Your state entity, operations, contracts, and insurance affect liability protection.

Does this calculator include state taxes?

The calculator includes a limited planning adjustment for certain state-level S corporation taxes. It does not model every state, city, franchise, payroll, or filing tax. Review the state note in your result and consult a tax professional.

Is this calculator tax advice?

No. It is an educational estimate based on the information you enter and simplified assumptions. A CPA or tax attorney can evaluate your full income, deductions, state rules, and eligibility.

Free 2026 estimate for business owners

S-Corp vs LLC Calculator

See how much you could save in taxes as an S-Corp vs. staying an LLC — instant estimate, no signup.

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YOUR BUSINESS

Start with the profit your business keeps.

Use annual net profit after ordinary business expenses but before paying yourself.

Estimated annual net profit

Your industry or role

Salary you pay yourself (reasonable salary)

Business stateTax filing status

Educational estimate only. This calculator does not include federal income tax, every state or local tax, credits, deductions, retirement contributions, or other household income. Consult a CPA or tax attorney before making an election.

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The important distinction

An LLC is a legal entity. S Corp is a tax election.

You can keep your LLC and ask the IRS to tax it as an S corporation. The potential savings come from how employment taxes apply to owner salary and distributions.

Default LLC tax treatment

A single-member LLC normally reports business profit on the owner’s return. About 92.35% of net earnings is generally subject to self employment tax.

S Corp salary

An owner who works in the business must receive reasonable compensation. Salary is subject to payroll taxes.

S Corp distributions

Remaining profit may be distributed to the owner without being included in the employment tax calculation.

When might it make sense?

Profit creates room between salary and distributions.

Many owners begin exploring an S Corp election when consistent annual profit reaches roughly $40,000 to $75,000. That is only a conversation starter. The right threshold depends on reasonable salary, state rules, payroll costs, and the owner’s complete tax picture.

If a market-rate salary would consume nearly all business profit, there may be little distribution left to create employment tax savings.

The operational side

What it takes to run an S Corp

Run payroll

Pay yourself on a regular schedule, withhold payroll taxes, and file payroll reports.

Document reasonable compensation

Use comparable market pay, your duties, experience, and time in the business to support the salary.

File a separate return

An S corporation generally files Form 1120-S and gives each shareholder a Schedule K-1.

Keep clean records

Separate salary, owner distributions, business expenses, and personal spending throughout the year.

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Once you decide

Keep business and personal money separate.

A dedicated business checking account makes salary, distributions, taxes, and operating expenses easier to document throughout the year.

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Sources and assumptions

Built for a useful estimate, not a tax return.

The 2026 calculation uses a $184,500 Social Security wage base, current Social Security and Medicare rates, the 92.35% self employment earnings factor, and a $2,000 annual planning allowance for payroll and additional tax preparation.

It does not model federal income tax, the qualified business income deduction, other W-2 wages, federal or state unemployment taxes, every state or local tax, retirement contributions, or tax credits. State adjustments are limited planning estimates based on official state rates and minimums.

IRS self employment tax SSA 2026 wage base IRS reasonable compensation California S corporation tax Illinois replacement tax New Jersey S corporation minimum tax

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