LLC vs. S-Corp Calculator: The $80,000 Profit Tipping Point
When is an LLC no longer the best option for your business? For most entrepreneurs, the "Tipping Point" happens at $80,000 in net profit.
Below $80,000, the administrative costs of running an S-Corp (payroll, separate tax filings, bookkeeping) often outweigh the tax savings. But once you cross that $80k threshold, the math changes drastically.
The 15.3% Problem
As a single-member LLC, you pay 15.3% Self-Employment Tax on 100% of your profit.
- Profit: $100,000
- SE Tax: ~$15,300
- Plus Income Tax
The S-Corp Advantage
An S-Corp allows you to split your income into two buckets:
1. Salary (W-2): Subject to 15.3% FICA tax.
2. Distributions (K-1): Exempt from 15.3% FICA tax.
### The Math at $100k Profit
If you elect S-Corp status and pay yourself a "Reasonable Salary" of $60,000:
- You pay 15.3% tax on the $60,000 salary ($9,180).
- You pay **0%** SE tax on the remaining $40,000 distribution.
- **Total Savings:** ~$6,120 per year.
The Calculator: Is It Worth It?
If your business is trending toward six figures, staying as a simple LLC is effectively giving the IRS a "tip" they don't deserve.
- **Net Profit < $60k:** Stay an LLC.
- **Net Profit $60k-$80k:** Grey zone. Start planning.
- **Net Profit > $80k:** **Mandatory S-Corp territory.**
Ready to stop tipping the IRS? We can run a custom projection for your business to show you exactly how much an S-Corp election would save you in 2026.