Answer: Enter your values and the LLC vs S Corp Calculator returns the exact result instantly — formula, worked example, and a plain-English explanation are included below the tool.
Self-employment tax vs payroll tax on your real numbers, with the verdict
An S corp election saves roughly 15.3% of every dollar you take as distributions instead of salary. At $120,000 of profit with a $60,000 salary, a default LLC pays about $16,955 in self-employment tax while the S corp pays $9,180 in payroll tax — a $7,775 saving, or about $6,600 after the $1,000–$1,500 of added payroll and accounting costs. Below about $60,000 of profit the election usually costs more than it saves.
2026 rules: 15.3% SE/FICA tax, Social Security wage base $184,500, SE tax on 92.35% of net profit.
| Net profit | Assumed salary | SE tax (LLC default) | Payroll tax (S corp) | Tax saved | Saved after ~$1,200 costs |
|---|---|---|---|---|---|
| $60,000 | $35,000 | $8,478 | $5,355 | $3,123 | ~$1,900 |
| $80,000 | $45,000 | $11,304 | $6,885 | $4,419 | ~$3,200 |
| $120,000 | $60,000 | $16,955 | $9,180 | $7,775 | ~$6,600 |
| $200,000 | $90,000 | $28,234* | $13,770 | $14,464 | ~$13,300 |
*At $200,000 of profit the SE base ($184,700) just crosses the $184,500 Social Security wage base, so the last dollars owe only the 2.9% Medicare piece. Salaries shown are ones a CPA might defend for a full-time operator — plug in your own before making the call.
An LLC is a state-law structure; an S corp is a federal tax election — and an LLC can make that election with IRS Form 2553. That's the comparison most people actually mean, and it's the one this calculator runs: the same business, taxed both ways.
Default LLC: self-employment tax = 15.3% × 92.35% × net profit, with the 12.4% Social Security piece capped at the 2026 wage base of $184,500 (Medicare's 2.9% has no cap). S corp: payroll tax = 15.3% × salary only (employer half plus employee half), same wage base. The saving is the difference; the net saving subtracts the payroll service and 1120-S accounting the election adds — typically $1,000 to $1,500 a year.
Enter your expected net profit, the salary you could defend with market data for your role, and your real added costs if you've priced a payroll service. The verdict box weighs the net saving: clearly positive, thin, a wash, or negative. The warning fires if your salary looks low relative to profit — the reasonable-compensation rule is where S corp audits start.
A consultant netting $120,000 who pays themselves a $60,000 salary. Default LLC: 120,000 × 0.9235 = $110,820 of SE base, × 15.3% = $16,955. S corp: 60,000 × 15.3% = $9,180 on the salary, with the other $60,000 as distributions owing no payroll tax. Gross saving: $7,775. Net of $1,200 in payroll and accounting: $6,575 a year, every year, for filing one form and running one payroll.
Now the caution case: $50,000 of profit with a $30,000 salary saves 15.3% on $20,000 of distributions — $3,060 gross — but one lean year at $30,000 of profit wipes out the margin entirely, and flipping the election in and out looks indecisive to the IRS. That's why the standard advice is to wait until profit is boring and reliably past the $60,000–$80,000 mark.
| LLC (default taxation) | LLC taxed as S corp | |
|---|---|---|
| How you get paid | Owner draws, whenever | W-2 salary through payroll + distributions |
| Self-employment / payroll tax | 15.3% on 92.35% of all net profit | 15.3% on the salary only |
| Payroll required | No | Yes — quarterly 941s even for one employee |
| Tax return | Schedule C or partnership return | 1120-S + reasonable-comp documentation |
| Typical added cost | $0 | ~$1,000–$1,500/yr |
| Liability protection, QBI, state fees | Identical — the election only changes federal payroll taxation | |
Formation costs are the same either way — the incorporation cost calculator prices those by state. The step-by-step reasoning lives in the LLC vs S corp guide.
Roughly 15.3% of the profit you take as distributions instead of salary, minus about $1,200 a year in added payroll and accounting costs. At $120,000 of profit with a $60,000 salary, the election saves about $7,800 in self-employment tax — call it $6,600 net of costs. At $60,000 of profit the net saving shrinks to about $1,900, which is why volatile businesses usually wait.
Below about $40,000 of net profit, payroll costs and extra accounting almost always eat the savings — many CPAs put the practical floor at $60,000. The math turns clearly positive between $60,000 and $80,000 of profit and improves from there as the distribution slice grows.
15.3% (12.4% Social Security plus 2.9% Medicare) applied to 92.35% of net profit, because the employer half is deducted first. The Social Security piece stops at the 2026 wage base of $184,500; Medicare has no cap. On $120,000 of profit that's about $16,955.
Whatever a comparable job pays — the IRS requires reasonable compensation judged by role, duties, and local market rates. Paying yourself $1 and taking the rest as distributions is the classic audit flag. There's no safe percentage; a compensation memo citing salary data for your role is what holds up.
About $1,000 to $1,500 all-in: a basic payroll service runs $500 to $1,000 a year for a single owner-employee (with quarterly 941 filings and W-2s), and the 1120-S return adds several hundred over a simple Schedule C. State fees don't change with the election.
Both structures qualify for the qualified business income deduction, which 2025 legislation made permanent at 23% for 2026 returns below the income threshold. The wrinkle: S corp owners subtract their own W-2 wages from QBI, so a bigger salary shrinks the deduction. It's a second-order effect next to the payroll-tax split.
Yes, and that's how most people do it. Form the LLC under state law, then file IRS Form 2553 to elect S corp taxation. You keep the LLC's simpler state paperwork and get the salary-plus-distributions split without forming a corporation.