What Is the LLC vs S-Corp vs Sole Proprietorship Tax Calculator?
The LLC vs S-Corp vs Sole Proprietorship Tax Calculator helps you get precise numbers for your specific situation in seconds. Instead of guessing or spending hours on manual calculations, get accurate results in seconds. Enter your details above and let the calculator do the work.
Why This Calculation Matters
Making financial decisions without accurate numbers is like driving without a dashboard. This calculator gives you the specific figures for your situation so you can plan with confidence rather than rough estimates.
LLC vs S-Corp vs Sole Proprietorship Tax Calculator
How It Works
This llc vs s-corp vs sole proprietorship tax calculator uses established formulas to provide accurate results.
The basic rule:
- Self-Employment Tax = Net Income x 0.9235 x 15.3% (up to Social Security wage base)
- S-Corp Payroll Tax = Salary Portion x 15.3% (employer + employee share)
- QBI Deduction = 20% of qualified business income (subject to income limits)
- Tax Savings = Sole Prop Total Tax - S-Corp Total Tax
Results are estimates. Consult a professional for critical decisions.
Frequently Asked Questions
Why does an S-Corp save on taxes?
In a sole proprietorship or single-member LLC, all net income is subject to self-employment tax (15.3%). With an S-Corp, you pay yourself a reasonable salary (subject to payroll taxes) and take the rest as distributions, which are not subject to SE tax. The savings come from the distribution portion avoiding the 15.3% SE tax.
What is a reasonable S-Corp salary?
The IRS requires S-Corp owner-employees to pay themselves a reasonable salary before taking distributions. Generally, 50-70% of net profit is considered reasonable, though this depends on your industry and role. Setting it too low risks an IRS audit.
Why is the LLC tax the same as Sole Proprietorship?
A single-member LLC is a disregarded entity for federal tax purposes, meaning it's taxed identically to a sole proprietorship. The LLC provides liability protection but no federal tax advantage. You can elect S-Corp taxation for an LLC to get the payroll tax savings.
When should I choose S-Corp status?
S-Corp status generally makes sense when net business income exceeds $60,000-$80,000 per year. Below that, the additional accounting and payroll costs ($1,000-$2,000/year) often exceed the tax savings. The calculator accounts for typical filing costs in its recommendation.