Sole proprietorship, LLC, S corporation or C corporation? The right choice depends on who owns the business, how much risk it carries, how much it earns and your plans. Answer six plain-English questions for a suggestion with the reasons behind it, then estimate whether an S corporation election could lower your taxes.
This is general information, not tax or legal advice. Your answers stay on this device.
How the S corporation estimate works
As a sole proprietor or a regular LLC, you pay self-employment tax of 15.3% on most of your profit (Social Security up to the 2026 wage base of $184,500, plus Medicare). With an S corporation election, you pay yourself a reasonable salary, and payroll taxes apply to that salary rather than all your profit. The estimate compares the two after the extra yearly costs of an S corporation, such as payroll service and a business tax return.
It’s a starting point, not tax advice. Income tax, the qualified business income deduction and state taxes all affect the real result, so check with a tax professional before electing.
Frequently asked questions
Is an LLC the same as an S corporation?
No. An LLC is a legal structure formed with your state. An S corporation is a tax status that an LLC or corporation can elect with the IRS (Form 2553).
When is an S corporation usually worth it?
Often once profit is reliably above about $80,000, but it depends on your salary, costs and state. Use the estimate with your own numbers.
Can I change my structure later?
Yes. Many owners start as sole proprietors, form an LLC as they grow, and elect S corporation taxes when profit rises.
Last reviewed October 27, 2026.
