2026 tax year
Sole proprietor, S corp or C corp?
Ranked on what you keep, not on what you pay.
Three structures, three completely different tax treatments. A sole proprietor pays self-employment tax on every dollar of profit. An S corporation splits the profit into salary and distribution, and only the salary carries payroll tax. A C corporation pays 21% on its own profit and then taxes you again on whatever you take out.
That last point is why this asks how much you actually need to withdraw. Profit left inside a C corporation is taxed once, lightly. The same profit taken out is taxed twice. Every simplified comparison omits that input and then declares the C corporation either brilliant or useless.
A C corporation can show the lowest tax simply by leaving your money inside the company. Ranking on tax paid would recommend it to someone who needs the cash to live on. So the comparison is on what reaches your pocket, and retained profit is reported separately rather than counted as income.
Calculator
Salary share and withdrawal share are percentages. The withdrawal figure only affects the C corporation, it is what decides whether the second layer of tax applies at all.
Enter your figures above and press Compare.
What the comparison includes that most do not
- What your state charges the company. Four jurisdictions ignore the federal S election entirely; eighteen charge a minimum owed even at a loss. That is often larger than the federal saving.
- The cost of running payroll. An S corporation needs payroll and a separate return. It is a real annual cost and it is the reason the election does not pay at low profit.
- Both halves of payroll tax. An owner-operator bears the employer half as well, because it comes out of the same profit.
- Charges that cannot be computed here a gross receipts tax needs turnover, a net worth tax needs a balance sheet, are listed rather than silently dropped.
Related
General information, not tax advice. Choosing an entity has legal and administrative consequences beyond tax, and an election is not always easy to reverse, take advice before filing anything.