Finance · Free browser tool
LLC vs. Sole Proprietor Tax Calculator
Compare taxes between Sole Proprietorship, Single-Member LLC, and S-Corp election to find your optimal business structure.
Your business income
Enter annual totals. Results update instantly as you type.
This is a simplified planning estimate using approximate 2026 federal brackets—it does not model state taxes, the small additional deduction for the employer-side FICA match, S-Corp payroll/filing overhead, or state S-Corp franchise fees. It is not a substitute for a CPA.
Estimated annual savings with S-Corp election
$5,474
vs. staying a Sole Proprietorship / default Single-Member LLC
Sole Prop / LLC take-home
$93,882
Total tax $36,118
S-Corp election take-home
$99,356
Total tax $30,644
Side-by-side comparison
S-Corp distribution profit of $60,000 is exempt from self-employment/FICA tax — only the $70,000 salary portion is taxed at 15.3%.
Frequently Asked Questions
What's the actual legal and tax difference between a Sole Proprietorship and a Single-Member LLC?
Legally, an LLC creates a separate business entity that can shield your personal assets from business liabilities, while a sole proprietorship has no such separation. For federal tax purposes, though, a single-member LLC is a "disregarded entity" by default—the IRS taxes it exactly like a sole proprietorship, with business profit flowing to your personal Schedule C and subject to the same self-employment tax. Forming an LLC alone does not change your federal tax bill; it changes your legal liability protection.
What does "pass-through taxation" mean for a single-member LLC?
Pass-through taxation means the business itself does not pay federal income tax—all profit passes through to the owner's personal tax return and is taxed at their individual rate, avoiding the "double taxation" that traditional C-corporations face on both corporate profit and shareholder dividends. A default single-member LLC and a sole proprietorship are both pass-through by nature; electing S-corp status keeps that pass-through treatment while changing how self-employment tax is calculated.
How does electing S-Corp status actually reduce self-employment tax?
Under an S-corp election, the owner becomes an employee of their own business and must be paid a "reasonable salary" for the work performed, which is subject to standard FICA payroll tax (15.3% combined). Any remaining profit can be taken as a distribution, which is not subject to self-employment tax or FICA at all. The lower you can justify setting the reasonable salary relative to total profit, the more profit shifts into the FICA-free distribution bucket—which is exactly why the IRS requires the salary to be defensibly "reasonable" for the work performed, not artificially low.
Is my income and business data uploaded anywhere?
No. Every tax bracket and self-employment tax calculation runs locally in your browser using the same bracket math as our 1099 Tax Estimator—your income, expenses, and salary figures are never sent to a server.
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Sole Proprietor, LLC, or S-Corp? Choosing a Business Structure by the Numbers in 2026
Forming an LLC is a legal decision before it's a tax one. A single-member LLC gives you liability protection that a sole proprietorship does not, but by default the IRS treats that LLC as a "disregarded entity"—meaning your federal tax bill is calculated exactly the same way as a sole proprietorship, with all profit flowing to Schedule C and subject to the full 15.3% self-employment tax. If your only goal is reducing self-employment tax, forming a plain LLC alone will not do it.
The tax lever that actually changes self-employment tax exposure is electing S-Corp status (available to both LLCs and corporations that meet eligibility requirements). Under an S-Corp election, the owner becomes a W-2 employee of their own business and must be paid a "reasonable salary" for the work performed. That salary is subject to standard FICA payroll tax, but any remaining profit distributed to the owner escapes self-employment tax entirely—a meaningful difference once net income climbs into the range where the FICA savings outweigh the added payroll, tax-prep, and (in some states) franchise-fee overhead of running an S-Corp.
As a rough rule of thumb, many advisors suggest an S-Corp election starts becoming worthwhile somewhere around $80,000–$100,000+ in annual net business income, though the exact break-even point depends heavily on how large a "reasonable salary" the IRS would expect for your specific work—set it too low relative to comparable W-2 pay in your field, and the IRS can recharacterize distributions as wages, along with penalties. This calculator lets you test different reasonable-salary assumptions side by side against the default sole proprietorship/LLC treatment to see where your own break-even point falls.
Before comparing structures, get an accurate baseline of your current sole-proprietor tax exposure with the 1099 Freelance Tax Estimator , and if you sell across state lines, cross-check collection obligations with the US Sales Tax Calculator . This free calculator runs entirely in your browser, reusing the same federal bracket math as our other tax tools—your income, expenses, and proposed salary are never uploaded to a server. It is a planning estimate only, not legal or tax advice; consult a CPA before electing S-Corp status.