Free S-Corp tax savings calculator from Fynvorax. Compare LLC vs S-Corp self-employment tax and model reasonable owner W-2 salary.
For independent agency founders, technology consultants, and small business owners structured as a standard Single-Member LLC or Sole Proprietorship, taxes on self-employment income are often a major financial hurdle. The United States government taxes 100% of your business's net operating profit using the Self-Employment Contribution Act (SECA) rate of 15.3%. This tax covers Medicare and Social Security, and it applies before normal federal and state income brackets. This means that as net profitability grows past $80,000, high-earning individuals face steep payroll tax penalties on every dol
According to IRS guidelines, S-Corp owners must pay themselves a salary comparable to what a third-party employer would pay for identical professional services in the same geographical market and industry. This is determined using wage market surveys and experience.
Generally, tax savings begin to justify S-Corp administration costs when business net income reaches $80,000 to $100,000 annually, with a reasonable W-2 salary set around 40% to 50% of the total net business income.