Educational estimate. State fees change — verify with the Secretary of State.
A default LLC pays self-employment tax on all profit like a sole proprietor. We compare that to S-corp payroll tax on a reasonable salary, showing potential savings.
This surprises people: a default single-member LLC is taxed exactly like a sole proprietor — you pay 15.3% self-employment tax on all net profit. The LLC gives you liability protection, not a tax break. The tax savings come later, if you elect S-corp status and split your income into a reasonable salary (which owes payroll tax) plus distributions (which don’t).
Because only the salary owes the 15.3%, the distribution rides free of it — but you take on payroll filings, extra accounting and a "reasonable salary" requirement the IRS enforces. The election generally pays once profit comfortably exceeds a reasonable salary, often cited around $80k+. Run your numbers above, then confirm with a CPA.
Not by default — it's taxed like a sole proprietor. Savings come from an S-corp election.
A wage comparable to the role's market rate; the IRS scrutinizes lowball salaries.
Often once profit comfortably exceeds a reasonable salary (commonly ~$80k+).
No — confirm with a CPA.