S-Corp vs LLC Calculator
The classic owner question: which structure saves more? Enter your net income and salary split — see the estimated tax difference, honestly labeled as an estimate.
Your situation
Comparison
How S-Corp vs LLC works for a practice owner
The difference comes down to one tax: self-employment tax(Social Security + Medicare, 15.3%). As an LLC taxed as a sole proprietorship, your entire net income pays it. As an S-Corp, only your reasonable salary pays it — the rest is distributed as dividends, which avoid SE tax (though they still pay income tax).
That sounds like a clear win for the S-Corp, and it usually is — once your income justifies the added costs: payroll setup, filing a corporate return, and running payroll. Below roughly $50-70k of net income, the S-Corp overhead often eats the savings. The calculator shows the tax math; only you and your accountant can weigh the admin costs.
The "reasonable compensation" rule
The IRS requires S-Corp owner-employees to pay themselves a reasonable salary — not zero, and not artificially low. The IRS "reasonable compensation" guidance says salary should reflect what you would pay someone else to do the work. Pushing salary too low is the #1 audit trigger for S-Corps. The calculator shows a break-even salary percentage: above it, the S-Corp saves; below it, you are in audit territory.
Frequently asked questions
Is an S-Corp always better than an LLC?
No. The S-Corp wins on SE tax savings once income is high enough to cover the extra costs (payroll, corporate filing, accountant fees — typically $1,500-3,000/year). Below ~$50-70k net income, an LLC is usually simpler and cheaper overall. The calculator shows the tax difference; add your admin costs to decide.
What is reasonable compensation?
The IRS expects S-Corp owner salaries to match what the market pays for the work — it cannot be $0 or artificially low just to avoid SE tax. Many practices use 50-70% of net income as salary. Courts look at comparable wages for the role, region, and experience.
Do I still pay income tax on S-Corp dividends?
Yes. Dividends are not subject to SE tax, but they are taxable income. This calculator applies your income tax rate to the full net income (salary + dividends) for both structures, so the comparison isolates the SE tax difference.
Does the state change the math?
Yes. Some states charge franchise tax or have different S-Corp rules (e.g., California's $800 minimum franchise tax). The calculator uses federal rates; add your state's specific taxes to get your real number.
Should I switch from LLC to S-Corp?
Run the numbers here first, then talk to your accountant. The trigger is usually sustained net income where the SE tax savings exceed the admin costs — and your accountant will confirm you meet the reasonable compensation standard.
Methodology
LLC: SE tax (15.3%) on 100% of net income + income tax on 100%. S-Corp: SE tax on the salary portion only + income tax on the full net income. The break-even salary percentage = SE tax rate ÷ (SE tax rate + income tax rate). This is a conservative federal-only estimate — state taxes, QBI deduction, payroll costs, and the reasonable compensation standard are not modeled and can change the result. Confirm with your accountant.
Estimate for planning, not tax advice.