Business Entity Comparison Calculator

LLCs default to pass-through taxation (single layer of tax on the owner). S-Corps are also pass-through but allow owners to split income between salary (subject to payroll tax) and distributions (not subject to self-employment tax). C-Corps face entity-level federal tax (21%) plus shareholder tax on dividends - but can deduct fringe benefits and may qualify for QSBS exclusion.

Generally when net business income exceeds the owner's reasonable salary by enough to make the payroll-tax savings outweigh the additional payroll, accounting, and compliance costs (typically $1,500-$3,500/year extra). Many practitioners use a rough threshold of $40,000-$80,000 of profit above reasonable salary.

When raising venture capital (most institutional investors require Delaware C-Corps), planning to retain earnings inside the business, providing tax-favored fringe benefits, or aiming for the QSBS §1202 exclusion (up to $15M of capital gain (or 10x basis) excluded after a 5-year hold, for stock acquired after July 2025). The double tax usually outweighs benefits for small, profit-distributing businesses.

Yes, ideally both, before forming. Choice of entity drives tax, liability, fundraising, and exit options for the life of the business. The cost of forming and converting entities is small compared to the cost of being in the wrong structure for years.

A C-Corp pays 21% corporate tax on its profits. When those profits are then paid out to shareholders as dividends, they are taxed again at the personal level. Being taxed twice on the same earnings is what people mean by double taxation.

An S-Corp needs real payroll, quarterly filings, and usually a CPA, which can add roughly $1,200 to $3,000 a year. A single-member LLC carries far fewer administrative obligations, so on smaller incomes those extra costs can wipe out the payroll-tax savings.

No. The tool relies on simplified assumptions and leaves out the QBI deduction, state taxes, and your complete tax situation. Treat it as a starting point and check with a CPA before you settle on a structure.