Entity · 8 min read
LLC vs S-Corp Tax Guide
An LLC is a legal structure. S-Corp is a tax election. Owners often combine the two to cut self-employment tax — but only after net profit consistently clears the break-even line.
Default LLC taxation
A single-member LLC files on Schedule C. A multi-member LLC files Form 1065. All net profit is subject to 15.3% self-employment tax on top of income tax.
What changes with the S-Corp election
- Owner-employees take a reasonable W-2 salary
- Remaining profit flows through as a distribution
- Distributions avoid the 15.3% SE tax
- Owner must run payroll, file 941s, W-2, and 1120-S
