Tax Strategy10 min read • June 2026
LLC vs. S-Corp vs. C-Corp: Which Entity Saves You the Most Tax?
Your business structure is one of the biggest tax decisions you will make. Here is a plain-English breakdown of how each entity is taxed — and when to switch.
LLC (Single-Member)
Solopreneurs and early-stage businesses under $50K net profit
Tax Type
Pass-through (Schedule C)
SE Tax
Yes — 15.3% on all net profit
Corp Tax
None
Pros
Simplest to set up and maintain
No separate business tax return
Flexible profit distribution
Cons
Full SE tax on all profits
No ability to split salary vs. distributions
Less credibility with investors
S-Corporation
Profitable businesses with $50K+ net profit who want to reduce SE tax
Tax Type
Pass-through (Form 1120-S)
SE Tax
Only on reasonable salary
Corp Tax
None
Pros
SE tax only on salary, not distributions
Can save $5K–$20K+ in taxes annually
Pass-through taxation
Cons
Must pay yourself a "reasonable salary"
More complex — payroll required
Restrictions on shareholders
C-Corporation
Startups seeking VC funding or businesses retaining large profits
Tax Type
Corporate tax (Form 1120)
SE Tax
No SE tax
Corp Tax
21% flat corporate rate
Pros
Best for raising venture capital
Unlimited shareholders
Can retain earnings at 21% rate
Cons
Double taxation on dividends
Most complex structure
Not ideal for most small businesses