Piggy🏛️ Business structure
Whether to elect S-corporation status, and what to pay yourself if you do.
S-Corp vs Sole Proprietor
Payroll tax saved, QBI deduction lost — the half of the trade-off nobody shows you.
⚖️S-Corp Reasonable Salary
Price the job role by role, the way an analyst would — not as a percentage of profit.
🏗️LLC vs S-Corp vs C-Corp
All three taxed side by side — including the double tax the 21% rate is supposed to beat.
🧾Self-Employment Tax Calculator
2026 SE tax for freelancers: Social Security + Medicare, done right.
Electing S-corporation status is the most oversold decision in small business tax. The pitch is real — you pay payroll tax only on the salary you take, not on the whole profit — but it is routinely presented without its costs, and the resulting arithmetic is often wrong by half.
The two halves of the trade-off
The saving is straightforward. A sole proprietor pays self-employment tax on all the profit; an S-corporation owner pays payroll tax on their salary and takes the rest as a distribution.
The costs are three, and only one of them appears in most calculators. There is the administration — real payroll, quarterly filings, a W-2, a separate Form 1120-S, and in many states a franchise or minimum tax whether you made money or not. There is the qualified business income deduction you give up, because a salary is wages rather than business income, so every dollar you move into salary leaves the 20% §199A deduction. And there is the exposure that comes with setting your own salary.
The comparison calculator models all three, and shows something most tools miss: above the §199A threshold the effect reverses. The deduction is capped by the W-2 wages your business pays, and a sole proprietor pays none — so at higher incomes the salary is what makes the deduction reachable at all.
The number that carries the risk
There is no safe harbour and no percentage rule. Not 60/40, not any of the ratios quoted confidently across the internet — they appear nowhere in the statute, the regulations or the case law. The standard is what the business would have to pay someone else to do your job.
The reasonable salary calculator therefore refuses to take a percentage as an input. It prices the job the way a compensation analyst would: your hours split across the roles you actually perform, each valued at market rate. What comes out is a figure with a written rationale — which is the thing that survives an examination, because the number alone never does.