S-Corp vs LLC Tax Calculator

About this calculator

A default single-member LLC is taxed as a sole proprietorship: all business profit is subject to the full 15.3% self-employment tax (Social Security and Medicare combined), on top of income tax. Electing S-Corp status changes this — the owner pays themselves a 'reasonable salary,' which is subject to payroll tax, while the remaining profit is distributed as dividends that are not subject to self-employment tax at all.

The IRS requires that S-Corp salary be 'reasonable' for the work performed, meaning owners cannot pay themselves an artificially low salary purely to shift more profit into the tax-free distribution bucket — this reasonable-compensation rule is the main scrutiny point in an S-Corp election and the reason small-business CPAs typically benchmark salary against comparable market pay before recommending the switch.

This calculator estimates the self-employment tax savings of electing S-Corp status versus staying a default LLC, based on a salary/distribution split you specify, so you can see roughly how much the election could save before discussing it with a tax professional.