Business Entity Comparison
Compare Sole Prop, LLC, and S-Corp side-by-side. See SE tax, FICA, federal income tax, formation cost, and ongoing complexity — plus the exact profit level where S-Corp starts winning.
Your Situation
S-Corp Parameters
IRS requires a market-rate W-2 salary. Common range: $40k–$80k depending on your role and industry.
Payroll service (~$600/yr) + additional CPA fees + state S-Corp registration/annual fees.
Complete Side-by-Side
| Category | Sole Prop | LLC | S-Corp |
|---|---|---|---|
| SE / FICA Tax | $14,130 | $14,130 | $8,415 |
| Federal Income Tax | $12,287 | $12,287 | $13,841 |
| State Income Tax | $3,917 | $3,917 | $4,270 |
| Overhead / Filing Fees | $0 | $0 | $2,500 |
| Total Tax Burden | $30,333 | $30,333 | $29,026 |
| Net After Tax | $69,667 | $69,667 | $70,974 |
| Effective Rate | 30.3% | 30.3% | 29.0% |
| Formation Cost | $0 | $50–$500 | $500–$1,500 |
| Annual Ongoing Cost | None | $0–$300/yr | $1,500–$3,500/yr |
| Complexity | Low | Low–Medium | High |
| Recommended at | < $40k net | $40k–$80k | > $80k net |
What this calculator doesn't cover
- ⚠QBI (Section 199A) — S-Corps and LLCs may qualify for a 20% pass-through deduction on qualified income
- ⚠Self-employed health insurance deduction — reduces AGI for sole props and S-Corp owners
- ⚠SEP-IRA / Solo 401k — up to 25% of net self-employment income; massive deduction
- ⚠State-specific S-Corp fees — CA charges $800/yr minimum + 1.5% franchise tax on net income
- ⚠Liability protection — LLC and S-Corp both shield personal assets; sole prop does not
Consult a CPA before electing S-Corp status. Uses 2024 federal tax parameters and flat effective state rates.
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The S-Corp election (Form 2553) must be filed within 75 days of formation or by March 15 for the current tax year. Missing this deadline means waiting a full year. If you formed your LLC this year and want S-Corp status, act now.
Source: IRS Form 2553 Instructions