As an LLC taxed as a sole proprietor or partnership, you pay 15.3% self-employment tax on 92.35% of profit (Social Security part only up to the $184,500 wage base for 2026).
As an S-Corp you pay yourself a salary with 15.3% payroll tax (employee plus employer). The rest of the profit comes out as distributions without payroll tax. The S-Corp also pays Illinois personal property replacement tax of 1.5% on its income, federal unemployment tax, and costs for payroll and a separate business return.
Not included: income tax differences, the 20% QBI deduction (an S-Corp salary lowers it), Illinois unemployment insurance, and health insurance or retirement plans. These can move the answer either way, which is why we review it with you before you file Form 2553.
Usually once profit is steadily above about $50,000–$80,000 a year, because the self-employment tax saved on distributions has to beat the cost of payroll, a separate 1120-S return and Illinois replacement tax. The calculator above shows your own break-even point.
The IRS expects you to pay yourself what you would pay someone else to do your job. Many owners land between 40% and 60% of profit, but it depends on your industry and role. A salary that is too low is a common audit issue.
File Form 2553 by March 15, 2027 for the election to apply to the whole 2027 tax year. Late elections are sometimes possible with reasonable cause.
Illinois does not tax S-Corp income at the corporate rate, but S-Corps pay the 1.5% personal property replacement tax on their Illinois income. Owners still pay the 4.95% Illinois income tax on their share. Illinois also offers an elective pass-through entity tax that can help with the federal SALT cap.
Yes. We file Form 2553, set up payroll and quarterly filings, keep the books and prepare the 1120-S and K-1s every year, in English, Russian or Ukrainian.
We check whether you should itemize, claim every Illinois credit and file on time — in English, Russian or Ukrainian.