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calculator · business structure

does s-corp election make sense for you?

Find your breakeven point where S-corp tax savings outweigh the administrative overhead.

your scenario

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$

Typically 40–60% of net profit. IRS scrutinizes unreasonably low salaries.

net annual savings

+$3,375.46

After $2,200 S-corp overhead (payroll, accounting, filing)

as sole prop

$26,555.46

annual SE + state tax

as s-corp

$20,980

payroll + state + overhead

distributions (untaxed): $60,000

After $60,000 salary, distributions avoid SE tax.

tax burden across profit levels

should you elect s-corp?

S-corp makes sense if:

  • You're consistently profitable (typically $60k+ annual net profit)
  • Your net savings exceed the $2,200+ annual overhead costs
  • You're comfortable with payroll compliance (quarterly filings, W-2 for yourself)
  • You can justify a reasonable salary (IRS scrutinizes artificially low w-2s)

Stick with sole prop if:

  • Net profit is below $60,000 annually
  • You prefer simplicity and minimal administrative burden
  • State filing and payroll costs aren't worth the SE tax savings

Note: This is a rough estimate. Your actual breakeven depends on state-specific fees, accounting complexity, and other factors. Consult a CPA familiar with S-corp elections.

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Disclaimer: This calculator is for educational purposes only and does not constitute tax or legal advice. S-corp elections involve complex compliance requirements and IRS scrutiny on "reasonable salary." Please consult with a credentialed CPA or tax attorney before electing S-corp status.