The Notes

Choosing a Limited Liability Company (LLC) with an S-Corporation tax structure is one of the most tax-advantageous business forms available.

Under this arrangement, the owner is only required to pay W-2 salary taxes for themselves and their employees, with the company’s remaining profits being largely exempt from taxes. This business form, known as an LLC that elects S-Corp tax treatment, is particularly suitable for small to medium-sized enterprises.

For example, after deductions, if a company has $100,000 in profit:

• With a DBA/Sole proprietorship (where the owner is the sole proprietor): taxes would be approximately $26,000 (not including state taxes).
• With an LLC, taxes would be approximately $15,300 (not including state taxes).
• With an LLC that has elected S-Corp tax treatment: taxes would be about $7,600 (not including state taxes).

A limitation of the LLC choosing the S-Corp tax structure is that the owner must pay themselves a salary and pay their own taxes through a W-2 form.