S-Corp vs. Sole Proprietor Calculator
Considering whether an S-Corporation election makes sense for your business?
Use our free S-Corp vs. Sole Proprietor Savings Calculator to compare estimated self-employment taxes with estimated S-Corporation payroll taxes and additional S-Corp costs.
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The calculator can help you estimate self-employment tax as a sole proprietor, payroll taxes on S-Corporation wages, potential payroll tax savings, additional S-Corporation costs, the estimated annual difference, and how other W-2 wages may affect the calculation.
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This calculator is intended for educational purposes and provides an estimate only. An S-Corporation election involves more than payroll tax savings. Reasonable compensation, payroll requirements, income taxes, tax preparation costs, business structure, and your overall tax situation should also be considered.
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Weidner CPA helps small business owners in San Antonio and throughout Texas evaluate S-Corporation elections, reasonable compensation, payroll setup, bookkeeping, and year-round tax planning.
How this calculator works
Compare estimated sole-proprietor self-employment tax with S-Corp payroll tax on an owner salary, then subtract the added costs you enter. This is a screening tool for a tax-planning conversation. It does not calculate your complete income-tax return or determine a reasonable salary.
Example: $90,000 profit and $50,000 salary
Assuming no other wages, no Social Security wage-base limitation and no Additional Medicare Tax, $90,000 × 92.35% × 15.3% is about $12,717 of sole-proprietor self-employment tax. A hypothetical $50,000 S-Corp salary has $7,650 of combined employer and employee Social Security and Medicare tax. The difference is about $5,067 before payroll, unemployment tax, tax return, and other S-Corp costs. The example salary is an input, not a recommended salary.
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Assumptions and limits
Shareholder-employees must receive reasonable compensation for services before non-wage distributions. Compensation depends on the work performed and relevant facts; there is no universal salary percentage. Other W-2 wages, retirement contributions, health insurance, the qualified business income deduction, state taxes, and election eligibility can change the result. Consistent profit alone does not establish that an election is appropriate.
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What should I prepare before discussing an S-Corp election?
Bring current financial reports, prior tax returns, ownership information, and details about the work you perform. The goal is to compare the full cost and practical requirements of an election with your current tax treatment.
Financial records: Gather a year-to-date profit and loss statement, balance sheet, prior-year business and personal tax returns, and a projection of profit for the rest of the year. Identify unusual income or expenses so a one-time event is not mistaken for recurring profit.
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Entity and ownership: Bring formation documents, your EIN confirmation, ownership percentages, the current federal tax classification, and any prior election or IRS acceptance notice. Discuss the proposed effective date and whether the entity and shareholders meet the eligibility requirements.
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Owner work and payroll: Describe your duties, time spent in the business, experience, how revenue is generated, and available pay information for comparable work. Include other W-2 wages, employee payroll, health insurance, and retirement plans. Reasonable compensation depends on the facts; a fixed percentage of profit is not a substitute for that analysis.
Costs and cash flow: Discuss payroll processing, payroll taxes and filings, a separate business tax return, accounting support, state requirements, and the cash available to run payroll. Ask which costs are already included in your monthly service plan.
Illustrative example: Two businesses each show $90,000 of profit. In one, the owner personally performs nearly all revenue-producing work. In the other, employees and equipment produce much of the revenue. The same profit figure does not establish the same reasonable salary or the same benefit from an S-Corp election.
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An LLC does not automatically have S-Corp tax treatment. Eligible entities generally use IRS Form 2553 to make the election. Review the official eligibility and filing instructions with your CPA before choosing an effective date. This checklist is educational; the example is hypothetical.
Bring your results to a free CPA consultation
Bring your current profit-and-loss report, prior return, expected owner duties, wage information, and estimated payroll costs. Explore tax planning, CPA-led bookkeeping and pricing and plans, or book a free consultation.
Publisher and official sources
Published by Weidner CPA, San Antonio, Texas. Firm principal: Edward Weidner, CPA. Page updated, 2026. Educational estimates; not individualized tax advice. See the IRS guidance on S-Corp reasonable compensation and shareholder-employees.