Entity comparison
LLC vs S-corp: the short version
An LLC is a legal entity. An S-corp is usually a tax election layered on top of an LLC. For most solo founders, the real question is not "LLC or S-corp?" It is "Should my LLC stay simple for now, or should I add payroll and S-corp tax treatment?"
Recommendation first
Start with the LLC. Consider S-corp treatment only after the income is consistent.
If you are under roughly $45K in net business income, S-corp treatment is usually premature. Around $60K+ and stable, the tax savings can start clearing payroll, accounting, and state costs. Use the calculator before you pay anyone to set it up.
What changes with S-corp treatment
You add payroll
The owner pays themselves a reasonable W-2 salary. Payroll tax applies to that salary, but remaining profit can be distributed without self-employment tax.
You add compliance
More tax forms, more bookkeeping discipline, payroll deposits, and more CPA review. The savings have to beat the extra work.
You keep the LLC wrapper
In the common solo-founder setup, the LLC remains the legal entity with the state. The S-corp election changes how the IRS taxes it.
You need a defensible salary
The IRS does not require a magic percentage, but it does expect reasonable compensation for the actual work the owner performs.