TaxFlow - Year-Round Tax Automation

One of the most impactful tax decisions a small business owner can make is choosing the right entity structure. The wrong choice can cost you thousands in unnecessary taxes each year.

Sole Proprietorship The simplest structure with no formal registration required. All business income flows to your personal return and is subject to self-employment tax (15.3%) on top of income tax. Best for very small, low-risk operations.

Single-Member LLC Provides liability protection with the same tax treatment as a sole proprietorship by default. Can elect to be taxed as an S-Corp once income exceeds roughly $40,000–$50,000 to save on self-employment taxes.

S-Corporation The most popular structure for small business owners earning $50,000+ in profit. You pay yourself a "reasonable salary" (subject to payroll taxes) and take the remainder as a distribution (not subject to self-employment tax). Can save $5,000–$15,000+ annually.

C-Corporation Subject to corporate income tax (21%) plus dividend tax when profits are distributed. Generally not recommended for small businesses unless you plan to retain significant earnings in the company or seek venture capital.

When to Make the Switch TaxFlow's S-Corp optimizer can calculate exactly when switching to an S-Corp election makes financial sense for your specific income level and situation.

Choosing the Right Business Entity Structure for Tax Savings

Sole Proprietorship The simplest structure with no formal registration required. All business income flows to your personal return and is subject to self-employment tax (15.3%) on top of income tax. Best for very small, low-risk operations.

Single-Member LLC Provides liability protection with the same tax treatment as a sole proprietorship by default. Can elect to be taxed as an S-Corp once income exceeds roughly $40,000–$50,000 to save on self-employment taxes.

S-Corporation The most popular structure for small business owners earning $50,000+ in profit. You pay yourself a "reasonable salary" (subject to payroll taxes) and take the remainder as a distribution (not subject to self-employment tax). Can save $5,000–$15,000+ annually.

C-Corporation Subject to corporate income tax (21%) plus dividend tax when profits are distributed. Generally not recommended for small businesses unless you plan to retain significant earnings in the company or seek venture capital.

When to Make the Switch TaxFlow's S-Corp optimizer can calculate exactly when switching to an S-Corp election makes financial sense for your specific income level and situation.