Salary vs Distribution Calculator for Restaurant

As a restaurant owner, how you pay yourself has significant tax implications — and getting it wrong can cost you thousands each year or trigger an IRS audit. If your restaurant is structured as an LLC (the most common structure for single-location restaurants), you're taxed as a pass-through entity: all profits flow to your personal return and you pay self-employment tax (15.3%) on the entire amount. Many profitable restaurant owners save $10,000–$20,000+ per year by electing S-Corp status, which allows you to split your compensation between a "reasonable salary" (subject to FICA/Medicare) and distributions (not subject to self-employment tax). The key phrase is "reasonable salary" — the IRS expects restaurant owner-operators to pay themselves a salary commensurate with what you'd pay a general manager in your market, typically $50,000–$80,000 depending on location and revenue. Going too low on salary to maximize distributions is a red flag that triggers audits. This calculator is set up with typical restaurant owner numbers so you can model the tax difference between LLC and S-Corp structures. For most restaurant owners generating $100K+ in annual profit, the S-Corp election pays for itself within the first year, even after accounting for payroll processing and additional tax filing costs.