LLC vs S Corp: How A $10M Business Owner Cuts Self-Employment Tax

LLC vs S Corp: How A $10M Business Owner Cuts Self-Employment Tax LLC vs S corp comes down to the 15.3% self-employment tax on Schedule C profit, and the S corp election can cut it roughly in half. Walking a real example: an HVAC business doing $10 million in revenue at 30% margins. An LLC by default reports on Schedule C, where net income picks up FICA, roughly 15.3% (10 to 15% effective after the Social Security cap). Filing the LLC as an S corporation can cut $30,000 of self-employment tax to $15,000. The tradeoffs: an 1120S return that costs $1,500 to $2,500 on average, required payroll at a reasonable salary, and more formality. Plus the reality check on C corps, ROBS and Wyoming-everything pitches: the vast majority of small businesses are pass-through entities, and if someone is selling you a complicated structure, get a second opinion. US federal rules for LLC owners and S corporations, 2026. General education; your facts decide the outcome. 0:00 A $10M HVAC business example 1:07 What Schedule C really costs: FICA at 15.3% 2:36 Filing the LLC as an S corporation 3:05 S corp pros: cutting self-employment tax in half 4:17 S corp cons: the 1120S and reasonable salary 5:28 The structures you get pitched and rarely need What is the difference between an LLC and an S corp for taxes? An LLC by default reports on Schedule C, where all net income is subject to self-employment tax of roughly 15.3%. Electing S corporation status splits income into a reasonable W-2 salary and distributions, and only the salary picks up payroll tax. How much does an S corp save on self-employment tax? Often around half. If you are paying $30,000 in self-employment taxes on a Schedule C, an S corporation structure can cut that to roughly $15,000, depending on your salary level. What does an 1120S tax return cost? Around $800 on the cheap end, $5,000 to $10,000 for complicated businesses, and $1,500 to $2,500 on average. Do most small businesses need a C corp or holding company structure? No. The vast majority of small businesses are sole proprietors, partnerships, or S corporations. Complicated multi-entity C corp pitches usually deserve a second opinion. Stephen Mandracchia, CFP® and IRS Enrolled Agent Tulip Financial Planning LLC, Alabama registered investment adviser Book a 30-minute call: https://tulipfp.com/?utm_source=youtu... Stephen Mandracchia, CFP®, Enrolled Agent. Tulip Financial Planning LLC is an investment adviser registered in the State of Alabama. This video is general education and not personalized tax, legal, or investment advice, and watching it does not create an advisory or client relationship. Any examples are hypothetical and for illustration only. They are not client results and no outcome is guaranteed. Tax rules change and results depend on your specific facts. Comments reflect the views of individual viewers, are not verified by Tulip, and are not testimonials or endorsements. #SCorp #SelfEmploymentTax #LLCvsSCorp