S‑Corp vs LLC: Choosing a Business Structure (2025)

Overview of liability, taxes, self‑employment tax implications, and when an S‑Corp election may make sense for HOH filers.

LLC (Default)

Flexible entity; by default treated as sole proprietor (single‑member) or partnership (multi). Self‑employment tax applies to net earnings.

S‑Corporation Election

S‑Corp can reduce SE tax by paying a reasonable salary and treating remaining profit as distributions not subject to SE tax. Weigh payroll costs and administrative burden.

Considerations

  • Administrative complexity and payroll requirements for S‑Corp
  • State-level taxes and franchise fees
  • Impact on Qualified Business Income (QBI) deduction
  • Consult a CPA when deciding entity elections