Result
How to use this calculator
Enter your net business profit, the reasonable salary you would pay yourself through an S corp, and expected S corp admin costs (payroll service plus state filings). The calculator compares the 15.3% self-employment tax on all profit against payroll taxes on salary only, minus admin costs.
The formula
LLC (sole prop) SE tax = profit × 92.35% × 15.3%. S corp payroll tax = salary × 15.3% (employer and employee halves). Savings = LLC SE tax − S corp payroll tax − admin costs. Income tax on profits is roughly the same in both setups, so it is not part of the comparison.
Example
Profit $120,000, salary $60,000, admin $1,500: as a sole prop you owe about $16,955 in SE tax; through an S corp you owe about $9,180 in payroll tax plus $1,500 admin — saving roughly $6,275 per year.
FAQ
How does an S corp save on taxes?
An LLC owner pays 15.3% self-employment tax on all net profit. An S corp splits profit into salary and distributions: only the salary carries payroll tax, so the distribution share escapes the 15.3%.
What is a reasonable salary?
One that matches what comparable businesses pay for your role. The IRS can reclassify low salaries and assess back taxes, so document market data for your position and industry.
When is an S corp not worth it?
When profit is small. After admin costs (payroll services, state fees, extra tax returns), savings on profits under roughly $40,000-$60,000 are usually too thin to justify the overhead.
Does this include income tax savings?
No. Federal income tax on profit is approximately the same whether you operate as a sole prop or S corp; the difference this calculator shows is payroll/SE tax only.