LLC vs. S-Corp: Which Is Better for Small Business Tax Savings in 2025?

If you're starting a business or already operating as an LLC, one of the most important decisions you’ll ever make is choosing the right business structure for tax savings. As we move through 2025, more entrepreneurs are searching for ways to reduce self-employment taxes, increase take-home profit, and stay compliant with IRS rules. In this blog, we’ll compare LLC vs. S-Corp and help you understand which structure may be best for your business.

11/15/20251 min read

a remote control sitting on top of a table next to a book

What Is an LLC?

An LLC (Limited Liability Company) offers legal protection and flexible management. For taxes, a single-member LLC is automatically taxed as a sole proprietorship, meaning the owner pays self-employment tax (15.3%) on all business profits.

Pros of an LLC:
✔ Simple to form and manage
✔ Flexible ownership
✔ Pass-through taxation
✔ Fewer IRS requirements

Cons:
✘ Higher self-employment tax
✘ Limited tax-saving options unless electing S-Corp

What Is an S-Corporation?

An S-Corp is not a business entity type — it’s a tax election made with the IRS (using Form 2553). Many LLCs elect S-Corp status to reduce taxes.

Pros of an S-Corp:
✔ Pay less self-employment tax
✔ Ability to split income into salary + distributions
✔ Increased take-home profit
✔ Attractive for growing businesses

Cons:
✘ Must pay yourself a “reasonable salary”
✘ Requires payroll processing
✘ More bookkeeping and IRS compliance

Which One Saves More in Taxes in 2025?

If your business earns $50,000+ per year in profit, an S-Corp election could save thousands annually.

Example Scenario:

StructureProfitTaxes OwedPotential SavingsLLC$90,000Taxes on full $90kNo special tax savingsS-Corp$90,000Salary taxed + distributions taxed lowerApprox. $5,000–$10,000 per year

When to Consider Switching to an S-Corp

You should consider S-Corp taxation if:
✔ You earn at least $50,000 yearly profit
✔ You want to lower self-employment tax
✔ You are already structured as an LLC
✔ You are growing and plan to hire

Common Tax Mistakes Business Owners Make

🚫 Waiting too long to elect S-Corp status
🚫 Not paying themselves a legal “reasonable salary”
🚫 No professional bookkeeping
🚫 DIY tax filing without professional oversight

Need Help Choosing or Filing Correctly?

At Accounting Pros Tax Services, we help business owners:

🔹 Select the best tax structure
🔹 File S-Corp election forms
🔹 Handle payroll & bookkeeping
🔹 Maximize yearly tax savings
🔹 Stay fully IRS compliant

📞 Book a free consultation today!

TEL: +1 (727) 476-6313

🌐 www.accountingprostaxservices.com

📍 Serving clients locally and remotely across the U.S

Disclaimer: This content is for educational and informational purposes only and is not intended as tax, legal, or financial advice. Tax rules and regulations may change and individual circumstances vary. Please consult a licensed tax professional, accountant, or attorney before making decisions regarding business structure or tax planning.