LLC vs. S Corp for Beginners: Which Saves You More?

Intro

Starting a business is exciting, but choosing between an LLC and an S Corp can feel overwhelming—hustlebeginner.com breaks it down for you.

Why It Matters

Picking the right business structure impacts your taxes, liability, and growth potential. hustlebeginner.com was built to help users like you make smarter decisions with confidence. Whether you’re launching an affiliate marketing side hustle or scaling to millions, understanding LLC vs. S Corp is key to maximizing profits and minimizing stress.

How to Choose Between LLC and S Corp as a Beginner

1. Understand What an LLC Is
   
   A Limited Liability Company (LLC) is a flexible structure that protects your personal assets (e.g., home, car) from business debts or lawsuits. It’s taxed as a sole proprietorship (or partnership for multiple owners), with all profits reported on your personal tax return (Form 1040, Schedule C). For example, a Wyoming LLC like yours has no state income tax, making it ideal for beginners.
   
2. Learn What an S Corp Is
   
   An S Corporation is a tax election, not a legal entity—you can keep your LLC but elect S Corp status via IRS Form 2553. Profits are split into a “reasonable salary” (subject to payroll taxes) and distributions (not subject to self-employment tax), potentially saving money. It’s suited for businesses with consistent revenue but requires more paperwork.
   
3. Compare Tax Implications
   
   
   
   
   • LLC: All profits face self-employment tax (15.3% up to $168,600 + 2.9% Medicare in 2025) and personal income tax (10–37%). For a $50,000 profit, you’d pay ~$7,650 in self-employment tax plus ~$4,500 in income tax.
   
   
   • S Corp: Pay a salary (e.g., $30,000, taxed at 15.3% = $4,590) and take distributions ($20,000, no self-employment tax). Total taxes drop to ~$7,000, saving ~$5,150, but accounting costs rise.
   
   
   
   Check out hustlebeginner.com’s tax calculator for personalized estimates.
   
4. Evaluate at Different Growth Stages
   
   • Startup (<$50k/year): LLC is simpler, with minimal filings (Schedule C) and low accounting costs (~$500–$1,500/year). Ideal for your affiliate marketing side hustle earning ~$47k/year.
   • Growth ($75k–$150k): S Corp saves ~$3,000–$7,000 in taxes by avoiding self-employment tax on distributions, but requires payroll setup (~$600–$1,200/year). Consider switching at ~$75,000 revenue, as you plan.
   • Scaling ($400k+): S Corp shines, saving $15,000–$30,000 on high profits, offsetting higher accounting fees (~$1,500–$4,000/year).
5. Consider Setup and Maintenance
   
   • LLC: Easy to form (e.g., Wyoming LLC via Northwest Registered Agent, ~$100 + $60/year fee). Minimal paperwork, ideal for beginners.
   • S Corp: Requires Form 2553 ($100 via NWRA), payroll setup, and annual Form 1120-S. More complex but manageable with an accountant, aligning with your preference to pay for tax savings.
6. Protect Your Assets
   
   Both LLC and S Corp offer limited liability, shielding personal assets from business risks. For your online affiliate marketing, an LLC’s simplicity is often enough early on, while S Corp’s tax benefits grow with income.
   

Pro Tips for Beginners

• Use Relay’s 20 sub-accounts to organize funds (e.g., taxes, affiliate payouts) in an LLC or S Corp, tracked via Hurdlr for QuickBooks Pro exports.
• Start with an LLC for low revenue (<$50k); switch to S Corp at $75k+ to save taxes, as you plan.
• Consult a CPA before electing S Corp to set a “reasonable salary” (e.g., $30k–$40k for affiliate marketing) to avoid IRS audits.

Next Steps CTA

Choosing between an LLC and S Corp sets your business up for success—start with an LLC for simplicity, then consider S Corp as profits grow. Explore more business tools on hustlebeginner.com to streamline your affiliate marketing venture, like our guide to banking solutions.

FAQ

What is the main difference between an LLC and an S Corp?

An LLC is a legal structure with pass-through taxation; an S Corp is a tax election that splits income into salary and distributions to reduce self-employment taxes.

Can I switch from LLC to S Corp later?

Yes, file IRS Form 2553 (e.g., via Northwest Registered Agent for $100) when revenue hits ~$75k, typically within 75 days of formation or by March 15 for the next tax year.

Is an LLC better for a side hustle?

Yes, LLCs are simpler and cheaper for side hustles earning <$50k, like your ~$47k affiliate marketing income, with lower accounting costs.

How much can an S Corp save in taxes?

At $75k net income, an S Corp saves ~$3,000–$5,000 by avoiding self-employment tax on distributions, increasing to $15,000–$30,000 at $400k–$700k.

Do LLCs and S Corps protect my personal assets?

Both offer limited liability, protecting your home and car from business debts or lawsuits, ideal for online businesses.

How do I track LLC or S Corp finances?

Use tools like Hurdlr to track income/expenses and export to QuickBooks Pro, paired with Relay’s sub-accounts for organized bookkeeping.

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Written by Greg of the hustlebeginner.com Editorial Team. Learn how we write and test all our content for accuracy at hustlebeginner.com/about-us.