LLC vs S-Corp: Which is Better for Your Business?

LLC vs S-Corp: Making the Right Choice

Choosing the right business structure can save you thousands in taxes each year.

LLC (Limited Liability Company)

Pros:

• Simple to set up and maintain
• Flexible management structure
• Pass-through taxation (no double taxation)
• Liability protection for personal assets

Cons:

• Subject to self-employment tax on all profits
• May have higher self-employment tax burden

S-Corporation

Pros:

• Potential self-employment tax savings
• Pay yourself a reasonable salary, take remaining profits as distributions
• Distributions are not subject to self-employment tax
• Same liability protection as LLC

Cons:

• More administrative requirements
• Must pay reasonable salary (IRS scrutinizes this)
• Stricter rules on ownership and stock classes
• More expensive to maintain

When to Consider an S-Corp

Generally, an S-Corp election makes sense when your business consistently earns over $40,000-$50,000 in net profit. The savings on self-employment tax begin to outweigh the additional administrative costs.

Example Savings

If your business earns $100,000 in profit:

• LLC: ~$15,300 in self-employment tax
• S-Corp (with $60,000 salary): ~$9,180 in payroll taxes + savings of ~$6,120

---

Not sure which structure is right for you? Schedule a consultation and we'll analyze your specific situation.