LLC, S-Corp or C-Corp: Choosing the Right Entity
Entity choice affects self-employment tax, payroll obligations and how profits are taxed. The best answer depends on profit level and how you plan to take money out.
Entity selection is one of the few decisions that affects your tax bill every single year, so it is worth a conversation rather than a form.
Single-member LLC
Simple to form and maintain. Profit flows to your personal return and is subject to self-employment tax.
S-Corporation
Allows you to split earnings between reasonable wages and distributions, which can reduce self-employment tax. It adds payroll filings and a separate business return, so the savings need to be large enough to justify the compliance cost.
C-Corporation
Taxed separately at the corporate level. Useful for retaining earnings in the business or raising outside investment, but distributions to owners are taxed a second time.
How to decide
Look at expected profit, whether you need payroll anyway, your state's filing fees, and your plans for outside investors. We routinely model two or three scenarios before forming an entity.
Questions about your own situation?
General articles can only go so far. Tell us about your circumstances and we’ll give you a direct answer.