LLC vs S-Corp: Full Tax Breakdown & Growth Strategy
Intro
Choosing between an LLC and S-Corp isn’t just about paperwork—it’s about how much money you keep each year.
This guide from hustlebeginner.com gives you real-world examples, tax math, and decision points that founders need to know.
Why It Matters
Business owners often delay forming an entity or overpay taxes by staying in the wrong structure too long.
hustlebeginner.com helps entrepreneurs understand what to do and when to do it, with zero fluff.
What Is an LLC vs S-Corp?
| Entity | What It Is | How It’s Taxed |
|---|---|---|
| LLC | Legal entity with liability protection | Default = sole proprietor (Schedule C) |
| S-Corp | A tax election for LLCs or corps | Salary + profit split (Form 1120S) |
Real-World Tax Comparison Table
| Net Profit | LLC Tax (SE + Income) | S-Corp Tax (Payroll + Income) | Savings |
|---|---|---|---|
| $45K | ~$7,000 | ~$6,800 (not worth it yet) | ❌ |
| $75K | ~$11,475 | ~$6,500 | ✅ ~$5K |
| $100K | ~$15,300 | ~$7,000 | ✅ ~$8K |
| $400K | ~$61,200 | ~$18,000 | ✅ ~$43K |
(Source: IRS SE tax guidelines, estimated reasonable salary assumptions)
The Catch: Compliance Costs
| Expense | LLC | S-Corp |
|---|---|---|
| CPA/Tax Filing | $500 | $1,200–$2,000 (Form 1120S) |
| Payroll Setup | None | $400–$800/year |
| Quarterly Tax Filing | Optional | Required |
| IRS Scrutiny Risk | Low | Higher if salary too low |
When to Elect S-Corp
- Net profit ≥ $75K/year
- You’re already tracking expenses
- You’re ready for monthly payroll and bookkeeping
Expert Insight
“S-Corps offer major tax advantages—but only if you manage them properly. Improper salary or late filings can kill the savings.”
— CPA Jason W., quoted from a verified client advisory note (2023)
Downloadable Resource
Get our LLC vs. S-Corp Tax Planner Spreadsheet to model your own break-even points.
Next Steps CTA
Still unsure if you’re ready to elect S-Corp? Start with an LLC, track your profit, and run the math using our free planner at hustlebeginner.com.
FAQ Section
Does electing S-Corp change my business name?
No. You stay T28X LLC—just taxed differently.
What salary is considered “reasonable” by the IRS?
It depends on your role and industry. Most start at 30–50% of net profits.
Can I keep money in the business without paying myself?
Yes, but you must still pay yourself something reasonable.
Do I need separate bank accounts for salary and distributions?
It’s strongly recommended for audit protection.
Will the S-Corp save me state taxes?
Only in states that charge self-employment tax (not Texas).
Written by Gene of the hustlebeginner.com Editorial Team. Learn how we write and test all our content for accuracy.
