Insights & Resources

One of the most common questions we get from new business owners is: Should I form an LLC or elect S-Corp status? The answer depends on your income level, growth plans, and how much administrative complexity you are willing to manage. What Is an LLC? A Limited Liability Company provides personal liability protection while allowing profits to pass through to your personal tax return. By default, a single-member LLC is taxed as a sole proprietorship ??? all net profit is subject to self-employment tax (15.3%). What Is an S-Corp? An S-Corporation is a tax election, not a separate business entity. An LLC can elect to be taxed as an S-Corp. The key benefit: you pay yourself a reasonable salary and only that salary is subject to self-employment taxes. Remaining profits are distributed as dividends ??? not subject to SE tax. The Tax Savings Example Say your business nets $150,000 per…