What is the main tax advantage of an S-Corp?

S-Corp owners pay payroll taxes (15.3%) only on their salary, not on profit distributions. If your business earns $100,000 and you pay yourself $50,000 salary, you only pay SE tax on $50,000 instead of the full $100,000 — saving roughly $7,650.

When does an S-Corp election make sense?

Generally when your net business profit consistently exceeds $40,000-50,000 per year. Below that, the administrative costs of S-Corp (payroll, additional accounting) often outweigh the tax savings.

Is a single-member LLC taxed differently from a sole proprietor?

By default, no. A single-member LLC is a disregarded entity and taxed exactly like a sole proprietorship. The LLC provides liability protection but not tax benefits unless you elect S-Corp or C-Corp taxation.

What is a reasonable salary for S-Corp purposes?

The IRS requires S-Corp owner-employees to pay themselves a reasonable salary comparable to market rates for similar work. Paying yourself too little to minimize payroll taxes is a known audit trigger. Most tax professionals recommend 40-60% of net profit as a starting point.

Does this calculator apply to Canadian businesses?

This calculator uses US federal tax brackets and SE tax rates. Canadian businesses have different rules including CPP contributions and provincial tax rates. A Canadian version is on our roadmap.

Side Hustle

Business Structure Tax Estimator

Compare your real take-home as a Sole Proprietor, LLC or S-Corp — side by side, with 2024 federal tax brackets.

Annual revenue (USD)

Annual business expenses (USD)

S-Corp: Owner salary (USD)

State income tax 5%

0%13%

Filing status

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Choosing the wrong business structure costs freelancers and small business owners thousands of dollars per year in unnecessary taxes. A self-employed person making $100,000 as a sole proprietor pays roughly $14,000 in self-employment tax alone. An S-Corp election on the same income could save $5,000-8,000 annually by reducing the self-employment tax base.

This calculator computes your actual take-home pay under three structures side by side — so you can see exactly how much each option costs you.

How it works

Enter your annual revenue and business expenses. For S-Corp comparison, enter a reasonable owner salary (the IRS requires S-Corp owners to pay themselves a reasonable salary before taking distributions). Set your state income tax rate and filing status.

The calculator applies 2024 federal tax brackets and the correct self-employment tax treatment for each structure. Sole Proprietors and single-member LLCs pay SE tax on all net profit. S-Corps only pay payroll taxes on the owner salary — distributions are not subject to SE tax, which is the primary tax advantage.

Business Structure Tax Estimator

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