S-Corp vs. LLC in 2026: A Real-World Decision Framework
Priya Anand, EA · April 22, 2026 · 9 min
Most online comparisons miss the point. Here's how we actually advise clients earning $80K–$400K in net business income.
The S-Corp election doesn't reduce your income tax — it reduces self-employment tax. That distinction matters. Below ~$60K of net profit, the savings rarely cover the added compliance.
Above $80K, the math typically tips. A reasonable salary of ~40% of profit, with the rest as distributions, can save $4K–$12K annually in SE tax.
But S-Corp comes with payroll filings, separate books, and stricter reasonable-compensation tests. Don't elect just because a YouTube video told you to.
We model both scenarios on actual client P&Ls before recommending the election. Schedule a consult and we'll do the same for you.