LLC vs S-Corp: Which Structure Is Right for Your Business?
June 10, 2026
LLC vs S-Corp: A Plain-English Guide
One of the first questions a new business owner faces is which legal structure to choose. The two most common options for small businesses are the LLC and the S-Corporation. Both protect your personal assets. Both pass income through to your personal tax return. The differences are in how you pay yourself, how you handle taxes, and how much paperwork you are willing to take on.
The LLC
An LLC is the simpler starting point. You file once with your state, pay a small annual fee, and your profits pass straight to your personal return. You pay self-employment tax on everything you earn from the business. For most businesses under $50,000 in net profit, this is the right structure.
The S-Corporation
An S-Corp lets you split your income into a salary and a distribution. You only pay payroll taxes on the salary portion. That can mean meaningful savings once your net profit climbs past $50,000 to $60,000 per year. The tradeoff: you need to run payroll, file a separate business return, and meet reasonable-compensation rules the IRS watches closely.
The Decision
If you are just starting out or your income is modest, start with an LLC. Keep it simple. As your revenue grows, talk to an advisor about whether an S-Corp election makes sense. Timing matters: converting mid-year is messier than starting fresh in January.
Not sure which applies to your situation? That is exactly the conversation we have with every new client before we file anything.