LLC vs. S Corporation: Which Structure Saves You More?
Choosing the right entity can mean thousands in annual tax savings. Here is how to think through the decision.
One of the most common questions we hear from growing business owners is whether they should remain an LLC or elect S Corporation status. The answer depends on your net income, how you pay yourself, and your long-term goals.
An LLC offers simplicity and liability protection, but all net earnings are typically subject to self-employment tax. Once your profit consistently exceeds a certain threshold, an S Corp election can reduce that burden by splitting income between salary and distributions.
The key is paying yourself a reasonable salary while taking the remainder as distributions, which are not subject to self-employment tax. This must be done carefully and in compliance with IRS guidelines, which is where professional guidance pays for itself.
Before making any election, we model both scenarios using your actual numbers so the decision is based on data, not guesswork. The right structure today may not be the right structure in three years, so we revisit it as your business evolves.
This article is for general informational purposes and does not constitute tax or legal advice. For guidance tailored to your situation, schedule a consultation with our team.
