S-Corp Election Calculator — Methodology

Step-by-step calculation

Compare the tax bill on a default LLC to the same net profit run through an S-corp election, including compliance overhead.

1. 1

   Enter annual net profit

   Projected or trailing-12-month net profit before salary.

2. 2

   Set reasonable salary percentage

   60% is a typical defensible default. Below 40% raises IRS audit risk; above 80% reduces the savings.

3. 3

   Pick state tier and overhead

   State affects taxable income; overhead defaults to $2,500/yr (payroll + 1120-S).

4. 4

   Read the savings and decision flag

   Positive savings means S-corp is worth electing. Negative means LLC default is cheaper.

Assumptions and overrides

Simplified federal income-tax rate by income band (not bracket-by-bracket). LLC SE tax fully calculated. S-corp model assumes pass-through of W-2 wages and K-1 distributions; doesn't model state-specific S-corp taxes (e.g. California 1.5% franchise tax, NYC GCT, TN F&E). Compliance overhead defaults to $2,500 — adjust for your specific payroll service and accounting fees.

Every region default on the calculator is editable. If your effective rate, fee, or threshold differs from the headline figure shown, type your own number into the field — the calculator recomputes instantly without leaving this page.

Primary sources

Region-tagged primary sources for the default rates, thresholds, and benchmarks used in this calculator.

• USAIRS — Self-Employment Tax (US 15.3%)
• UKGOV.UK — Self-Assessment & Class 2/4 NI (UK)
• SASARS — Provisional Tax (SA)

Review cadence and corrections

This methodology and the underlying rate defaults are reviewed at least annually, and immediately following any change to the headline rate from IRS, HMRC, or SARS. Every substantive update is recorded on the public changelog. Spotted an error? See the corrections policy for how to report it.

See the full editorial policy for the standards every page on BusCalcTools is held to.