LLC vs S-Corp: which is better for taxes?

LLC versus S-Corp is a common tax planning decision for small business owners. This guide explains the trade-offs, including self-employment tax, payroll requirements, and potential savings, plus calculators that estimate outcomes under each structure.

Key differences

  • LLCs default to pass-through taxation with SE tax on profits.
  • S-Corps can reduce SE tax by splitting salary and distributions.

When S-Corp savings appear

  • Higher net income where owner wages can be reasonable.
  • Ability to manage payroll and compliance costs.

What to consider before switching

  • Additional payroll filing obligations.
  • State-level S-Corp rules or fees.

Related calculators

Entity choice quick compare (sole prop vs S-corp)

Estimate S-Corp savings compared to sole prop income.

Self-employment tax estimator (SECA)

Estimate SE tax on net earnings.

1099 tax estimator

Estimate total tax impact on 1099 income.

California tax toolsNew York tax toolsTexas tax toolsFlorida tax tools

FAQ

Does an LLC automatically save taxes compared to an S-Corp?

Not always. Savings depend on income, payroll setup, and compliance costs.

Updated 2026-01-20. TaxGuide Pro provides educational tax guidance, not legal advice.