LLC vs S Corp Explained

A single-member LLC taxed as a sole proprietorship generally reports business income on Schedule C and may owe self-employment tax on net profit. An S corporation files a corporate return and pays owner-employees W-2 wages subject to payroll tax, with remaining profit potentially passed through as distributions.

Federal tax differences depend on reasonable salary, payroll costs, and profit level. TaxChecker's LLC vs S Corp Calculator compares simplified federal scenarios using user-entered salary—not entity formation or election advice.

S corporation owners often split income between wages (FICA applies) and distributions (generally not subject to self-employment tax in basic models). The IRS expects reasonable compensation for services, which TaxChecker does not determine.

Compliance costs—payroll processing, additional returns, state fees—may reduce net benefit from S corporation treatment. The calculator accepts user-entered compliance costs for planning transparency.

The S Corp Tax Calculator models owner salary, employer FICA, and federal income tax on wages and pass-through income for a single scenario. Pair it with Reasonable Salary Explained for educational context on compensation concepts.

Choosing an entity involves legal, state, and non-income-tax factors beyond TaxChecker's federal estimate scope. Consult attorneys and CPAs before electing S corporation status.