LLC vs. Sole Proprietor Tax Calculator
LLC or sole proprietor? This calculator shows the actual tax difference — including self-employment tax, liability protection value, and filing requirements — for your specific income level.
LLC vs. Sole Proprietorship Tax Comparison
Compare tax liability between operating as a sole prop and an LLC with S-Corp election
| Sole Prop | S-Corp LLC | |
|---|---|---|
| Gross Income | $100,000.00 | $100,000.00 |
| Salary (FICA Basis) | $100,000.00 | $50,000.00 |
| Distribution (No FICA) | — | $50,000.00 |
| SE / FICA Tax | $14,129.55 | $7,650.00 |
| Federal Income Tax | $11,615.75 | $12,328.50 |
| Total Tax | $25,745.30 | $19,978.50 |
| Take Home | $74,254.70 | $80,021.50 |
S-Corp election could save you $5,766.80/year. Salary capped at $50,000.00, remaining $50,000.00 taken as distribution — no FICA.
Note: Sole Prop and LLC (disregarded entity) pay SE tax (15.3% on 92.35% of net income). LLC + S-Corp pays FICA (15.3% on salary only). The employer's FICA share (7.65%) is a deductible business expense. Salary assumed at 60% of income or $50K max. Does not include state taxes or additional S-Corp administrative costs (payroll, filing).
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Frequently Asked Questions
Does an LLC save me taxes compared to a sole proprietor?+
A basic LLC (single-member) doesn't change your taxes — the IRS treats it the same as a sole proprietor. You still pay self-employment tax on all net income. The tax savings come when you elect S-Corp taxation for your LLC, which can save 15.3% on income above a reasonable salary.
When should I convert from sole proprietor to LLC?+
Form an LLC when: (1) you want personal asset protection (separates business and personal liability), (2) you're earning enough that the filing fees ($50-500/year) are worth it, (3) you want to appear more professional to clients, or (4) you plan to elect S-Corp taxation later.
What is the tax difference between LLC and S-Corp?+
An LLC taxed as a sole prop pays SE tax on all net income. An LLC taxed as an S-Corp pays FICA only on a "reasonable salary" — the rest is a distribution that avoids SE tax. On $150k net income with a $80k salary, S-Corp saves about $10,600/year in SE tax.
Does an LLC save me taxes compared to a sole proprietor?
A basic LLC (single-member) doesn't change your taxes — the IRS treats it the same as a sole proprietor. You still pay self-employment tax on all net income. The tax savings come when you elect S-Corp taxation for your LLC, which can save 15.3% on income above a reasonable salary.
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