S-Corp owners can split their income between a W-2 salary and shareholder distributions. Only the salary portion is subject to self-employment tax (15.3%). The IRS requires the salary to be "reasonable compensation" for your role, typically $40,000 to $80,000 for most small business owners. The distribution portion avoids payroll taxes, which is the primary tax advantage of the S-Corp election.
Salary vs Distribution Calculator for Marketing Agency
Pre-filled with real marketing agency industry benchmarks
Salary vs Distribution Calculator
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LLC (Pass-Through)
SE Tax: $21,681
Income Tax: $31,176
Total: $52,857
S-Corp
FICA on Salary: $8,672
Income Tax: $31,176
Total: $39,848
Potential S-Corp Savings: $13,009/year
Current structure: S-Corp | Total comp: $141,708