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LLC + S CORP
What is an S Corp election?
An LLC + S Corp election changes the way your business is taxed and could save you thousands. Along with those potential tax benefits, this structure delivers the same flexibility, credibility, and protections of an LLC.
How can an S Corp election help your business?
Forming an LLC and taking an S Corp election makes your business eligible for special pass-through taxation status with the IRS.
Avoid the dreaded double taxation
Pass-through taxation means only shareholders pay tax on their portion of profits.
Increased protection
LLC formation can help limit your personal responsibility for certain business liabilities.
Get the perks of paying yourself
This structure could provide tax savings since you won’t pay self-employment tax.
S Corp Savings Calculator
Use the calculator below to see if an S Corp election could help you save on your self-employment taxes.
Enter the expected net income (total revenue minus total
expenses) of your business for the year.
As an S Corp, you’ll be required to pay yourself a
salary for the year, just like you would pay an employee. Determining a reasonable salary depends on a
number of factors, but between 40% and 60% of net profits is average. Enter the salary amount you
would expect to pay yourself for the year as an S Corp, or use the calculator default of 60%. For more
information,
see this article
If you also have a 9-5 job, enter any additional W2
income for the year.
If you’ve had Social Security withheld from your
other W2 income, enter it here. Typically 7.65% of income is withheld up to $168,600.
Enter any additional expected self-employed income
for the year. For example, if you earned rental income from a vacation property.
Estimated
tax savings
$0
Estimate based on data you provide. Overall tax results will vary based on your tax situation. Does not include additional fees like tax preparation, business registration, and payroll services.
Looking to form a business?
We can help.
Compare S Corp to other business structures
| Provides limited liability protection |
Provides limited liability protection |
Provides limited liability protection |
Provides limited liability protection |
Provides limited liability protection |
|---|---|---|---|---|
| Can be for solo business owners |
Can be for solo business owners |
Can be for solo business owners |
Can be for solo business owners |
Can be for solo business owners |
| Can be for businesses with multiple owners |
Can be for businesses with multiple owners |
Can be for businesses with multiple owners |
Can be for businesses with multiple owners |
Can be for businesses with multiple owners |
| Income is reported on business owner’s individual tax return |
Income is reported on business owner’s individual tax return |
Income is reported on business owner’s individual tax return |
Income is reported on business owner’s individual tax return |
Income is reported on business owner’s individual tax return |
| Can apply for 501(c)(3) status in certain circumstances |
Can apply for 501(c)(3) status in certain circumstances |
Can apply for 501(c)(3) status in certain circumstances |
Can apply for 501(c)(3) status in certain circumstances |
Can apply for 501(c)(3) status in certain circumstances |
| Businesses making at least 40K in annual profit may see a tax benefit |
Businesses making at least 40K in annual profit may see a tax benefit |
Businesses making at least 40K in annual profit may see a tax benefit |
Businesses making at least 40K in annual profit may see a tax benefit |
Businesses making at least 40K in annual profit may see a tax benefit |
| Pays owner out a salary for services provided |
Pays owner out a salary for services provided |
Pays owner out a salary for services provided |
Pays owner out a salary for services provided |
Pays owner out a salary for services provided |
| Can issue stock |
Can issue stock |
Can issue stock |
Can issue stock |
Can issue stock |
| Double taxation applies |
Double taxation applies |
Double taxation applies |
Double taxation applies |
Double taxation applies |
| Must appoint a board of directors |
Must appoint a board of directors |
Must appoint a board of directors |
Must appoint a board of directors |
Must appoint a board of directors |
Just need an S Corp election?
If you have already formed an entity and want to take an S Corp election, we can help. Click Get started, then simply select LLC + S Corp and indicate you already have a business entity. We’ll complete your S Corp election form for you to sign and submit.
Tax implications for your business:
Because an S Corp uses an income-based tax rate, you may be able to enjoy a lower tax burden compared to other corporate structures. Visit our resource center to learn more about how forming an LLC with an S Corp election could help you realize potential tax savings.
Other considerations
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If you perform services for the business, you’ll need to begin paying yourself and potentially others as employees. This means you’ll have to adhere to payroll filing requirements. Don’t worry, we can help with that too.
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An S Corp election is only available for U.S.-based companies who will have no more than 100 owners/shareholders — all of which must be U.S. citizens or residents.
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LLC requirements like annual report filing, quarterly tax payments generally required, other formalities depending on state.
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LLC + S Corp FAQs
Business entities come with a variety of tax benefits. Depending on your business, you could save thousands in self-employment taxes by taking the S Corporation election. There are several steps involved. To be treated as an S Corp, after forming a corporation or LLC, the shareholders must make an election with the IRS. In addition, you will need to pay yourself a reasonable salary as a W2 employee and set up payroll and withholding. If your business is profitable, your payroll taxes and income tax from this salary may be offset by the savings you achieve on the self-employment tax. Important: for existing entities, the election must generally be made by March 15th of the year the election is to be effective.
In addition, a business generally can deduct the expenses directly related to its business activity — think advertising expenses, mileage, or professional services like what Block Advisors provides. Business credits for things like renewable energy, employee retirement plan, or health insurance may also be available depending on your circumstances. These credits would reduce a tax bill dollar for dollar.
The decision to form a business entity and take an S Corp election is an important one that includes many additional considerations. For example, as the owner of a business, you also need to ensure your business financials are maintained and updated (if you’re not already) and stay on top of annual business filing and other requirements depending on your state and industry. You may want to seek the advice of an attorney to evaluate these considerations. Our products, services, and advice are not a substitute for an attorney, and we do not provide legal advice or perform services performed by an attorney.
Here’s a great article detailing potential incorporation tax benefits for small businesses.
An EIN is an employer identification number and is needed in certain situations. For example, partnerships and corporations are required to have an EIN. Sole proprietorships and LLCs that have employees, pay excise tax, or contribute to a retirement plan also need an EIN. EINs are included with all of our packages.
An S Corp is a tax election for a small business corporation or LLC that allows the company to pass its income, loss, deductions, and credits through to its owners. The company itself is not subject to tax. And that income is subject to the shareholder’s individual tax bracket, which may be lower than self-employment tax.
To take an S Corp election, you’ll need your original business filing documents (either as an LLC or corporation) and an employee identification number (EIN). For an LLC, you will need to have “checked the box” to be taxed as a corporation. You will then file Form 2553, Election by a Small Business Corporation, with the IRS. If you select our S Corp product, we’ll take care of that for you.
While an S Corp election can help reduce your tax liability, there are a few extra steps you’ll need to do as part of your business operations. One of the biggest is making sure you’re drawing a reasonable salary and filing the necessary quarterly payroll and tax forms. You’ll also need to ensure your business financials are maintained and updated, as well as annual business filing requirements depending on your state and industry.
The main difference in the way the business is taxed. C Corp are taxed twice — the business pays taxes, as do the shareholders on their profits. When a business takes an S Corp election, only the shareholders pay taxes on their profits.
Read on to learn more detail about different business structures.
Block Advisors pricing for business formation starts at $149, which includes state formation, basic documentation, and an EIN. State filing fees are charged separately in addition to our fees and vary from state to state. If you have a question about a specific state, feel free to contact us at 877-472-1095. In addition, there will likely be other costs associated with starting your business, such as opening bank accounts, additional accounting or tax preparation fees, insurance, or obtaining a business license.
We’ve got the expert insights your business needs
Check out our resource center to learn more about taking your business from self-employed to an LLC, C Corp, or S Corp.