S-Corp vs LLC Tax Calculator

S-corp election typically pays off when net business profit exceeds $50,000-$75,000. Below that threshold, payroll costs ($600-$1,500/year), separate return prep ($500-$1,500), and state corporate fees often exceed the SE tax savings. At $100K profit, splitting $60K salary / $40K distribution can save $6,120 in SE tax annually.

The IRS requires S-corp owner-employees to pay themselves a "reasonable salary" before taking distributions. The salary must reflect what you would pay an outside hire for the same duties. Aim for the 25th-50th percentile of BLS occupational wage data for your role and region. Audits flagging unreasonably low salaries (e.g., $20K salary on $200K profit) are common.

Yes - the 20% Qualified Business Income deduction (Section 199A) applies to pass-through profit, and S-corp salaries are NOT QBI. Paying yourself a high salary reduces QBI-eligible income proportionally. There's a sweet spot: enough salary to satisfy reasonable comp, but not so much that you lose QBI value. Strong tax software or a CPA can optimize.

Form 2553 must be filed by the 15th day of the 3rd month of the tax year (March 15 for calendar-year LLCs). Late elections can sometimes be granted under Rev. Proc. 2013-30 if you have reasonable cause. New entities have 75 days from formation date. Once elected, S-corp status remains until you affirmatively revoke it.