LLC vs S-Corp: The Real Comparison Nobody Gives You

An S-Corp isn't a different entity — it's a tax election your LLC makes with the IRS. The question isn't "LLC or S-Corp" — it's "should my LLC elect S-Corp taxation?" Here's the honest math.

Head-to-Head Comparison

The Break-Even Math

The S-Corp election saves money by splitting income into two buckets: salary (subject to 15.3% SE tax) and distributions (not subject to SE tax). But the savings only outweigh the costs above a certain profit level.

→ Net profit under $50K: Stay as a standard LLC. The payroll costs, additional CPA fees, and compliance burden eat the savings.

→ Net profit $50K–$80K: The break-even zone. Run the numbers with your CPA — savings are modest ($2K–$5K/yr).

→ Net profit $80K+: S-Corp election almost certainly saves money. At $120K profit with a $60K salary, you save roughly $9,180/yr in SE tax minus ~$2,400 in additional costs = $6,780 net savings.

→ Net profit $200K+: Savings are significant — $10K–$15K+ per year.

When to Stay as a Standard LLC

→ Net profit under $50K/yr

→ You want maximum simplicity

→ Your income fluctuates significantly year to year

→ You're in the first 1–2 years of business and revenue is unpredictable

→ You have significant losses to pass through to your personal return

When to Elect S-Corp

→ Consistent net profit above $80K/yr

→ You're comfortable running payroll (or paying $40/mo for Gusto)

→ You have a CPA or are willing to hire one for the additional return

→ You plan to maintain this income level for multiple years