Enter Your Business Details
Enter your business net profit before paying yourself (total revenue minus business expenses, not including owner compensation).
Typical cost: $900–$1,800/yr (Gusto, ADP, etc.)
Default is a suggested salary (≈50% of profit). Lower salary = more savings but higher IRS audit risk. Distributions above your salary are not subject to payroll taxes.
How the S-Corp vs LLC Tax Calculation Works
When you operate as a single-member LLC or sole proprietor, the IRS treats your entire net business profit as self-employment income. You pay the full 15.3% self-employment tax (12.4% Social Security + 2.9% Medicare) on 92.35% of your net profit, up to the 2025 Social Security wage base of $176,100. On profit above that, you still pay the 2.9% Medicare portion.
When you elect S-Corp tax treatment, your business pays you a reasonable salary — and only that salary is subject to payroll taxes (the same 15.3% split between employer and employee). The remaining profit flows to you as a shareholder distribution, which is completely free of self-employment and payroll taxes.
The savings come entirely from the distribution portion escaping payroll taxes. The trade-off is the cost and complexity of running payroll (usually $900–$1,800/year with a service like Gusto or ADP) and the requirement that your salary is "reasonable" for the services you provide to the business.