| Sole Proprietor | LLC (default tax) | LLC taxed as S-corp | |
|---|---|---|---|
| Formation cost (year one) | $0 | calculating... | calculating... |
| Ongoing cost, every year after | $0 | calculating... | calculating... |
| Self-employment / payroll tax | calculating... | calculating... | calculating... |
| QBI deduction (20%, before phase-out) | calculating... | calculating... | calculating... |
| 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. |
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.
You’ve run your own numbers above. Enter your email and we’ll save it here. You’ll hear from us when we publish new tax and self-employed calculators, and if you tell us what number you wish you could look up, we’ll put your name on it if we build it. No spam. Cancel any time.
Self-employment income you earn while collecting unemployment generally has to be reported to your state and can reduce your weekly benefit; the earnings rules and limits vary by state, so check with your state's unemployment agency before you start billing clients. A few states run something different: a Self-Employment Assistance program that pays a weekly allowance instead of your regular benefit while you build the business full time, rather than requiring you to keep job-searching. Delaware, Mississippi, New Hampshire, New York, and Oregon have active programs as of this writing (U.S. Department of Labor, opened 2026-09-26); ask your state agency whether yours is one of them. On the tax side, the IRS lets you elect to deduct up to $5,000 of what you spend getting the business off the ground, a break that phases out once those costs pass $50,000 (IRS Publication 583, opened 2026-09-26). None of that changes the math above: run your expected profit through the comparison either way, and see the LLC Cost Calculator for your state's exact filing fee before you decide.
We may earn a commission if you sign up through the links above, at no extra cost to you. That doesn't change the numbers on this page. See our Terms for the full disclosure.
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%).
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.
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.
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.
Self-employment income you earn generally has to be reported to your state and can reduce your weekly benefit; the exact earnings rules vary by state. A few states, Delaware, Mississippi, New Hampshire, New York, and Oregon as of this writing, run a Self-Employment Assistance program that pays a weekly allowance instead of your regular benefit while you build the business full time. Check with your state's unemployment agency before you start billing clients.