LLC vs. S-Corp: Which Is Right for Your Small Business?
By Erick Martinez · September 22, 2026 · 5 min read
It's one of the most common questions from business owners. The short answer: an LLC is a legal structure, and S-corp is a tax choice. They can work together.
What an LLC is
A limited liability company is created under state law. By default, a single-owner LLC is taxed like a sole proprietorship and a multi-owner LLC like a partnership.
What an S-corp election does
An eligible LLC or corporation can elect to be taxed as an S-corporation. Owners who work in the business then pay themselves a reasonable salary through payroll, and remaining profit can pass through without self-employment tax.
The trade-offs
An S-corp can reduce taxes for some profitable businesses, but it adds costs and work:
- Running payroll and filing payroll forms
- A separate business tax return (Form 1120-S)
- Paying yourself a salary that is reasonable for your work
When it may make sense
The election tends to make more sense once profit is steady and high enough that the savings outweigh the extra costs. Compare both options with your own numbers before deciding.
This article is general information, not tax or legal advice for your situation.
Want help with this?
Erick works with clients in Cypress, TX and by virtual call, in English or Spanish.