S-Corp vs LLC Taxes 2025 — Which Structure Saves More?
2025 IRS data — updated for current tax year
Side-by-Side Tax Comparison
Example: $120,000 net business profit for a single owner.
| Item | LLC (Sole Prop) | LLC + S-Corp Election |
|---|---|---|
| Net profit | $120,000 | $120,000 |
| Owner salary | N/A | $70,000 |
| FICA on salary (employer + employee) | N/A | $10,710 |
| SE tax on full profit | $16,956 | N/A |
| Remaining distributions | N/A | $50,000 (no FICA) |
| Annual FICA/SE tax saving | — | ~$6,246 |
| Estimated additional S-corp costs | — | $1,500–$2,500/yr |
| Net annual saving | — | ~$3,750–$4,750 |
When LLC Wins
Below $40,000 in net profit, S-corp costs (payroll processing, additional state filings, quarterly payroll taxes) often exceed the SE tax savings. The LLC simplicity also matters for businesses with irregular income or multiple owners.
Frequently Asked Questions
What is a "reasonable salary" for S-corp purposes?
The IRS requires S-corp owners who provide services to pay themselves a salary comparable to what they'd pay a non-owner employee doing the same work. The Bureau of Labor Statistics wage data for your occupation is often used as a benchmark.
Does an S-corp election affect my state taxes?
It varies by state. Some states don't recognize S-corp status and tax LLC income differently. California, for example, imposes an additional 1.5% S-corp franchise tax (minimum $800/year).