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Business Tax Calculator

What’s the best type of entity for your business?

Choosing the best type of entity for a new or existing business involves both tax and non-tax considerations. Because a major factor in the decision is the federal tax treatment of the entity, we created this tool to help you compare how taxes will be calculated as a limited liability company (LLC), a corporation electing Subchapter S tax treatment (S-Corp), and a corporation not making Subchapter S elections (C-Corp). By using the calculator, you can learn how your choice of business entity will affect:

  • Federal income tax for the founders and the company
  • California state franchise tax and fees
  • Self-employment tax (for LLCs and S-Corps)
  • Pass-through deductions for pass-through entities
  • Medicaid and payroll taxes (for C-Corps)

Of course, this calculator cannot provide a comprehensive analysis of all the federal tax factors that may weigh into a choice of entity decision.* However, the calculator is a helpful tool that can help you focus on your choice of entity decision by examining some of the key factors that will impact the federal tax treatment of your selected entity including your revenue, overhead, equity stake, salary and profits/dividends, among other factors.

* This calculator does not take into account California income taxes for founders. It is only meant to give you a general picture of the taxation for different types of entities.

Under option 1, the company would not pay federal income tax for the LLC. The LLC profits would be added to the individual income of the LLC members and would be taxed as regular income of the members + 15.3% for 'self-employment tax' of .

The deductible portion of Self-Employment Tax is: . After deductions for overhead, self-employment tax, and the new pass-through deduction amounting to the income being taxed is: . Your tax here would be , including self-employment tax. The LLC would be subject to a California Franchise tax of . Total taxes for you and the company under this method would be .

Note: The undistributed profits are still recognized as income. Income must be recognized and taxed even if the money stays in the company's accounts.

Under option 2, the company would not pay federal income tax for the S-Corp or LLC. The income would be added to the individual income of the owners and would be taxed as regular income of the owners.

The proportional amount of taxable income here is . Additionally, you and the corporation will each pay FICA tax on the salary portion of , which amounts to each (we assume the company's portion is not included in your overhead and therefore subtract it from income so that you can compare against Option 1 without adjustment). Here, your taxes would be .

The S-Corp or LLC would be subject to a California Franchise tax of . Total taxes under this method would be .

The undistributed profits are still recognized as income. Income must be recognized and taxed even if the money stays in the company's accounts.

The company would pay federal income tax for the C-Corp or LLC being treated as a C-Corp. The company's federal income tax (21%) would be .

As a C-Corp, the company could pay dividends (distributions for LLC) to the owners. If the dividends qualify, they will be taxed at 15%, and the dividend tax on would be .

The tax on your salary would be . You and the Company are each responsible for FICA tax, which amounts to each (we assume the company's portion is not included in your overhead and therefore subtract it from income so that you can compare against Option 1 without adjustment).

The C-Corp would be subject to a California Franchise tax of . Total taxes under this method would be .

The undistributed profits are left in the company's accounts.

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