LLC vs. S-Corp

Learn the difference between an LLC and S-Corp for your business. An S-Corp is valuable for many reasons, including liability protection, tax advantages & sheltering assets.
Tax Reduction Planning

An S-Corp Could Save You Thousands

One of the most powerful tools available for small business tax reduction is to utilize an S-Corporation instead of a Schedule C or Sole Proprietorship.

Let's cover some of the S-Corp Basics to help you understand why it's so important.
Social Security tax is 12.4%, and medicare is 2.8%.  Up to the social security limits, you'll owe 15.3% self employment tax on what you earn.
Sole Prop
100% of the net income from a sole proprietorship is subject to the self employment taxes or medicare & social security taxes.
You can elect to be taxed as an S-Corp, where your company will pay you a salary, and then you take a distribution as the owner.

How are you Taxed?

Let's discover how the self employment tax plays out.
Sole Prop Taxes

100% Subject to SE Tax up to Social Security Limits

  • The 15.3% self employment tax is comprised of social security & medicare tax.  After paying self employment tax, you will still pay income taxes.
  • 12.4% social security tax is applied on all net profits up to the social security limit. That limit is $147,000 in 2022 and tends to go up to help fund the social security liabilities.
  • 2.8% Medicare Tax is owed on all of your schedule C income.
  • If you made $100,000 in net profit, you'd owe about $15,300 - without taking into consideration the QBI deductions or other nuances.
Sole Prop Taxes
S-Corp Taxes

S-Corp Income is Split Between Salary & Distribution

  • After electing to be taxed as an S-Corp, your income will be split between a reasonable salary and an owners distribution.
  • Distributions are NOT subject to the self employment taxes.
  • Your payroll is subject to self employment taxes.
  • The lower the salary, the lower the taxes, so the IRS declares you must take a "reasonable salary".
S-Corp Taxes
Maximizing an S-Corp

You'll want professional guidance to get the most of out the S-Corp

  • The goal is to take the lowest reasonable salary possible.
  • We must make wise decisions and maximize the benefits without breaking the law.
  • Pro-active, year-long guidance and planning is necessary to ensure you're getting the most out of an S-Corp.
Maximizing an S-Corp

‍$100,000 Net Profit


Net Profits

($50,000 S-Corp Salary)

Social Security Taxes


Medicare Taxes


Total SE Taxes Due


Annual SE Tax Savings


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Tax & Accounting Analysis

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