S-Corp vs. LLC: Which Structure Saves Houston Business Owners More?

"Should I be an S-corp?" is one of the most common questions we hear from growing business owners — and the answer can be worth thousands of dollars a year. But the right structure depends on your numbers, not a rule of thumb. Here's how to think about it.

The LLC: simple and flexible

A standard LLC is easy to set up and run, with pass-through taxation and minimal formalities. The catch: as a sole proprietor or partnership, all of your net profit is typically subject to 15.3% self-employment tax. As your income grows, so does that bill.

The S-corp election: where the savings come in

An LLC taxed as an S-corp lets you pay yourself a reasonable salary and take the rest of the profit as distributions — which aren't subject to self-employment tax. For many owners netting well into six figures, that can mean five-figure annual savings. The trade-offs: you must run payroll, pay yourself a defensible salary, and file a separate return.

It's not one-size-fits-all

The S-corp math works beautifully at some income levels and barely at others, and a salary set too low invites IRS scrutiny. Entity choice also affects retirement plans, owner benefits, and how you'll eventually sell or pass on the business. It's worth running the numbers with a professional before you elect — or before you assume you're stuck.

Not sure your business is structured the right way? Book a free 15-minute assessment and we'll show you what the numbers say.