Sole Proprietor vs LLCEnter your profit and state. See the real cost and tax difference, side by side, no signup.
Your numbers
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Revenue minus business expenses, before any tax.
Only changes the LLC formation and annual cost; federal tax math is the same in every state.
Used only for the QBI phase-out note, not the core comparison.
The rest of net profit becomes a distribution, not subject to the 15.3%.
Sole Proprietor
LLC (default tax)
LLC taxed as S-corp
Formation cost (year one)
$0
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Ongoing cost, every year after
$0
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Self-employment / payroll tax
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QBI deduction (20%, before phase-out)
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Liability separation
None. Your personal assets are exposed to business debts and claims.
Yes, if you keep it maintained (separate accounts, no commingling).
Yes, same LLC liability shield; the S-corp part is a tax election, not a legal structure.
Paperwork
Lowest. Schedule C on your personal return.
Schedule C still, plus state annual report and registered agent upkeep.
Highest. Payroll, a separate business tax return (1120-S), and reasonable-salary documentation.
Pick a state above to see its exact LLC filing and annual fee.
Run the numbers above to see your own comparison.
This calculator does not tell you which structure to pick. A sole proprietorship costs nothing and offers no liability separation. An LLC adds a formation and annual cost for that separation without changing your federal tax bill. Electing S-corp taxation on top of an LLC can reduce the 15.3% self-employment tax on the distribution portion of profit, once your salary is set at a reasonable level for the work, in exchange for payroll administration and (in some states) an added state-level tax. See the S-Corp Savings Worksheet for the deeper S-corp math.
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How this is calculated
Reviewed by the FigureNerd small-business team, with 40+ years of CEO operations and self-employed tax structure experience. Based on IRS Tax Topic 554 (self-employment tax), the IRS QBI deduction page, IRS guidance on S-corp reasonable compensation, and state Secretary of State fee schedules. About FigureNerd →
Self-employment tax: 15.3% (12.4% Social Security + 2.9% Medicare) applied to 92.35% of net profit, for the sole proprietor and default-tax LLC columns, up to the 2026 Social Security wage base of $184,500. Source: IRS Tax Topic 554, opened 2026-09-25.
S-corp column: the same 15.3% combined rate applies only to your entered salary (paid as payroll tax instead of SE tax); the remaining profit is a distribution with no 15.3% tax. This is the entire source of any S-corp tax difference. Source for the reasonable-compensation standard: IRS: S corporation employees, shareholders and corporate officers, opened 2026-09-25.
QBI deduction: 20% of qualified business income (the K-1 profit for the S-corp column, the full Schedule C profit for the other two), before the 2026 phase-out that begins around $201,750 (single) / $403,500 (MFJ) taxable income. Source: IRS: Qualified Business Income Deduction, opened 2026-09-25.
State LLC fees: your state's formation fee and annual/biennial report fee, sourced against an official Secretary of State page where we could open one. 25 of 51 states carry a fee opened and confirmed on 2026-08-19; the rest show "check your state's fee" rather than a guessed number. Full source table: LLC Cost by State.
This is an educational estimation tool, not tax or legal advice. Confirm your own numbers with a licensed CPA or attorney before you file anything or make an entity election.
Common questions
Does an LLC actually save you money on taxes compared to a sole proprietorship?
Not by itself. A default-tax single-member LLC is taxed exactly like a sole proprietorship: the same Schedule C, the same 15.3% self-employment tax on 92.35% of net profit. Forming an LLC buys liability separation, not a lower tax bill. The tax difference only shows up if the LLC elects S-corp taxation, which lets you split profit into a salary (subject to payroll tax) and a distribution (not subject to the 15.3%).
How much does it cost to form an LLC versus staying a sole proprietor?
A sole proprietorship costs nothing to form; you are already one by default the moment you do business under your own name. An LLC costs your state's filing fee once, plus a registered agent and an annual or biennial report fee every year after, both of which vary widely by state. Enter your state above for the real numbers.
When does an S-corp election start to make sense?
Once net profit is comfortably above a reasonable salary for the work performed, because the S-corp savings come only from the distribution portion, not the salary portion. Below roughly $40,000 to $60,000 in net profit, the payroll administration cost and complexity of an S-corp election typically outweighs the tax savings for most people; above that range it is worth running your own numbers, which is what this calculator does.
Is this calculator a substitute for a CPA or attorney?
No. It is an educational estimation tool built from IRS, SSA, and state Secretary of State sources we verify where we can. Every figure has a documented source and date. Confirm your specific numbers with a licensed CPA or attorney before you file anything or make an entity election.