LLC vs S-Corp Tax 2027 Calculator
Compare LLC vs S-Corp election tax 2027 — S-Corp saves self-employment tax on distributions but adds payroll complexity. Break-even around $40-60k profit.
LLC Tax (Default)
Single-member LLC: disregarded, taxes on personal 1040. Multi-member: partnership Form 1065. Self-employment tax on ALL profit (15.3% up to SS wage base).
S-Corp Election
File Form 2553. Pay yourself reasonable salary (W-2). Take REST as distribution. Distribution NOT subject to self-employment tax. Saves 15.3% on distribution portion.
Reasonable Salary Requirement
IRS requires 'reasonable' salary — what similar role would pay in your industry. Too low = audit trigger. Use Bureau of Labor Statistics for benchmarks.
Costs
S-Corp requires: separate payroll (Gusto $40/mo + accountant), Form 1120-S annually, quarterly payroll taxes, state corporate fees. Adds ~$1,500-2,500/yr.
Source: irs.gov Form 2553 S-Corp election, sba.gov business structure guide. Last updated: May 2026.
Frequently Asked Questions
When to elect S-Corp?
Profit > $40-60k. Below that, savings don't cover overhead. Above $80k profit, savings clearly worth it.
How much salary to take?
Industry benchmark from BLS. Roughly 40-60% of total profit for most service businesses. Don't go below — IRS reclassifies.
LLC to S-Corp — same entity?
Yes. LLC is legal structure (state). S-Corp is tax election (IRS). You can have LLC + S-Corp election. Most common setup for solo professionals.