Adjust the inputs below to match your situation. The calculator uses 2025 federal and New York rates, assumes single filing status, applies the standard deduction, and assumes this business is your only source of income. If you have other significant income — a W-2 job, another business, substantial investment income — your actual marginal rate is likely higher than shown and these results will understate your real tax. Consult a tax professional before making entity decisions.

The real advantage of an S-Corp is more targeted: self-employment tax (15.3%) only applies to your salary, not to the remaining profit distributions. If your business generates $300,000 in profit and you pay yourself a reasonable salary of $100,000, you pay SE tax on $100,000 — not on $300,000. That difference can be significant. But “no salary” is not a strategy — it’s tax evasion, and it comes with penalties, back taxes, and interest when the IRS catches it. Run your numbers in 30 seconds →

The most common misconception we hear from new business owners: “I formed an LLC to save on taxes.” This is not how it works. A single-member LLC is taxed identically to a sole proprietorship by the IRS — both report income on Schedule C and pay self-employment tax on net profit. The LLC creates no tax advantage on its own.

What the LLC actually provides is personal liability protection. If your business is sued, a properly maintained LLC creates a legal wall between the business judgment and your personal assets — your home, savings, and retirement accounts. That protection is real and often worth having. But it is a legal benefit, not a tax benefit, and it only works if you actually maintain the separation between business and personal finances.

If you operate in New York City, there are two separate layers of additional business tax that dramatically change the entity comparison — and both are almost entirely absent from the social media content you’ve seen.

The calculator below includes checkboxes for both NYC GCT (business operating in NYC) and NYC resident personal income tax. The UBT is factored in automatically when you check the NYC business checkbox and your profit exceeds the credit threshold.

The S-Corp election starts making sense when your net profit (after operating expenses but before salary) consistently exceeds roughly $80,000 to $100,000 per year. Below that threshold, the additional cost of payroll administration, a separate business tax return (Form 1120-S), and NYS minimum taxes often eats up most or all of the SE tax savings.

Here’s a simple framework:

For businesses with multiple owners, the comparison changes in important ways. A multi-member LLC is taxed as a partnership by default, requiring a Form 1065 partnership return and K-1s for each partner. Each partner pays self-employment tax on their share of the active business income.

A multi-member LLC can also elect S-Corp taxation, allowing the same reasonable salary / distribution structure — but all owners must be U.S. citizens or permanent residents, there can be no more than 100 shareholders, and there can be only one class of stock. These restrictions make S-Corp less flexible for complex ownership arrangements.

If your business has or plans to have outside investors, preferred equity, or complex ownership tiers, a C-Corporation is likely your only viable option — venture capital funds and most institutional investors cannot hold S-Corp shares. This is a legal and structural consideration that goes beyond tax, which is precisely why we recommend consulting a business attorney alongside your tax advisor when forming a multi-owner entity.