LLC vs. S-Corp: Which Entity Saves More Tax?
The S-Corp election can save thousands in self-employment tax — but only above a certain profit threshold.
An LLC is a legal entity. An S-Corp is a tax election. You can have an LLC taxed as a sole proprietorship, partnership, C-Corp, or S-Corp. The S-Corp election saves money by splitting your income between W-2 wages and distributions — only the wages are subject to self-employment tax.
Key terms
- Pass-through entity
- Profits flow to the owner's personal return; no entity-level tax.
- Reasonable compensation
- IRS-required W-2 wage the owner must pay themselves before taking distributions.
- Form 2553
- The election to be taxed as an S-Corp.
Frequently Asked Questions
How PF Consulting Firm can help
More in IRS & Financial
What Is an IRS Installment Agreement?
An IRS Installment Agreement lets you pay back taxes in monthly payments. Here are the types, eligibility rules, fees, and how to apply.
How Does an Offer in Compromise Work?
An Offer in Compromise lets you settle IRS tax debt for less than you owe — but only if you genuinely cannot pay in full. Here is how the IRS evaluates an offer.
How to Stop an IRS Wage Garnishment
An IRS wage garnishment can take up to 85% of your paycheck. Here's how to get it released — sometimes within days.
Ready to get started?
Talk with our team — we'll prepare every form, file with the right agency, and walk you through the process.