An LLC is a legal structure; an S-corp is a tax election. Many small businesses are both. The question is whether electing S-corp status saves more than it costs to run payroll and file an extra return.
When an S-corp usually makes sense
- Net profit consistently above roughly $60,000–$80,000.
- You can pay yourself a reasonable salary and leave profit in the business.
- You are prepared to run payroll and file Form 1120-S on time.
We model both scenarios side by side before recommending an election, so the decision is based on your numbers rather than a rule of thumb.
