Can a Single-Member LLC Be an S-Corp? Easy Answer!
Can a single-member LLC be an S-Corp? Yes, totally.
The "single-member" label doesn't disqualify you from S-Corp status. It just means that you own the whole business. Plenty of solo business owners elect S-Corp taxation and save thousands on self-employment taxes every year.
If you've been wondering whether your one-person LLC can become an S-Corp, or if you're confused about what that even means, you're in the right place.
Let's clear this up!
What Is a Single-Member LLC?
A single-member LLC is a limited liability company owned by one person.
You get liability protection for your personal assets if the business gets sued or runs into debt, but you still run the show completely on your own. You don't have any partners or co-owners. It's just you.
By default, the IRS ignores your single-member LLC for tax purposes. They call it a "disregarded entity," which means your business income gets reported on your personal tax return as if you were a sole proprietor. You file Schedule C with your 1040 and pay self-employment tax on all your profits.
Most people start with a single-member LLC because it's simple to set up and offers protection without much paperwork. But once your business starts making decent money, that self-employment tax bill can hurt.
Learn more about the benefits of being an LLC vs an independent contractor.
What Is an S-Corp?
An important thing to clarify is that an S-Corp is not a business structure. It's a tax election.
You don't "become" an S-Corp by filing special paperwork with your state. You already have a legal entity (like an LLC), and you tell the IRS you want them to tax it differently.
S-Corps use pass-through taxation, just like your default LLC setup. Profits flow to your personal tax return, and you pay based on your individual tax bracket. There's no corporate-level tax.
But S-Corps have one major advantage: you can split your income between salary and distributions. You pay yourself a reasonable wage (which gets hit with payroll taxes) and take the rest as distributions that avoid the 15.3% self-employment tax.
That's why people elect S-Corp status. It helps you save on taxes as long as you' have enough business income to reap the benefits.
Learn more about the S-Corp tax rate.
So, Can a Single-Member LLC Be an S-Corp?
Yes, single-member LLCs can elect S-Corp taxation.
The "single-member" part describes ownership, not tax treatment. You're not creating a new entity or changing your LLC's legal structure. You're just changing how the IRS taxes your existing business.
That said, to make the change, you'll need to meet the following requirements:
Your LLC must be a domestic business (formed in the United States)
You can only have one class of stock (which most LLCs automatically meet)
All shareholders must be U.S. citizens or residents
You can't have more than 100 shareholders (not an issue for a single-member LLC)
Your shareholders must be individuals, certain trusts, or estates, not corporations or partnerships
If you pass all of the requirements above, you just need to file Form 2553 with the IRS.
Once approved, you'll need to run payroll for yourself, file quarterly payroll tax returns, and submit an annual S-Corp tax return. The administrative work increases, but the tax savings often make it worthwhile.
For a quick answer if you should make a switch to an S-Corp based on your profits, use this FREE S-Corp calculator!
Benefits of LLC Taxed as an S-Corp
Electing S-Corp taxation for your single-member LLC often comes with financial advantages, especially once your business reaches a certain profit level.
Most owners make the switch to save money on self-employment taxes, but there are other benefits, too. Here's the full list:
You avoid paying 15.3% self-employment tax on your distributions, which can save you thousands of dollars annually.
You only pay payroll taxes on your salary portion, not on your entire business profit.
You still get pass-through taxation, so you avoid the double taxation that C-Corps face.
You can deduct the employer portion of your payroll taxes when calculating your income tax.
Your business gains more credibility with some clients and vendors who prefer working with corporations.
For example, if your LLC generates $120,000 in profit and you pay yourself a $70,000 salary, you'll save about $7,650 in self-employment tax on the $50,000 distribution. That's money that stays in your pocket instead of going to the IRS.
That said, keep in mind that the salary you pay yourself must be reasonable for your role and industry. The IRS scrutinizes S-Corp owners who take tiny salaries and massive distributions, so don't get greedy with the split.
Learn how to pay yourself as an S-Corp.
Are There Any Cons to the S-Corporation Tax Status?
S-Corp taxation isn't free money. You're trading tax savings for additional complexity and ongoing costs. You'll often deal with more paperwork and regulations than when running a single-member LLC.
Some cons include:
You must run payroll for yourself and file quarterly payroll tax returns, even though you're the only employee.
You'll file Form 1120-S annually for your S-Corp plus issue yourself a Schedule K-1, which adds complexity to tax season.
You lose flexibility with withdrawing money from your business because you need to maintain a regular payroll schedule.
You must track your basis carefully to avoid unexpected tax bills on distributions that exceed your investment in the company.
That said, the extra work and expense make sense when your tax savings justify the hassle.
For that, you need to make enough money in your business to pay yourself a reasonable salary and take the rest in distributions. If you're not there yet, you may prefer the simplicity of a single-member LLC for now.
Should You Do It?
There's no universal answer! S-Corp taxation makes sense for some single-member LLCs and wastes money for others.
Elect S-Corp status when:
You can pay yourself a reasonable salary and still have money left for distributions
The tax savings will exceed your payroll processing and administrative costs
You're comfortable managing more paperwork and compliance requirements
Your state doesn't impose extra taxes or fees that cancel out federal savings
Skip S-Corp taxation if your profits are still modest, you prefer simple bookkeeping, or the administrative burden outweighs the financial benefit.
You can always elect later when your business grows!
Learn more about when a S-Corp is worth it.
FAQs
Can I Be an S-Corp and an LLC at the Same Time?
Yes, because they're not mutually exclusive. LLC is your legal business structure. It's how your company is registered with your state. S-Corp is a tax election, and it's how the IRS taxes your business income. You maintain your LLC status with your state while the IRS treats you as an S-Corp for tax purposes. You're still an LLC legally, but you file taxes like an S-Corp.
Who Pays More Taxes, LLC or S-Corp?
A default LLC typically pays more in total taxes once profits reach a certain level. Single-member LLCs pay 15.3% self-employment tax on all business profits, while S-Corps only pay payroll taxes (also 15.3%) on the salary portion.
If your LLC makes $100,000 in profit, you pay self-employment tax on the full amount. That's $15,300. With S-Corp taxation, you might pay yourself a $60,000 salary and take $40,000 as distributions, paying payroll taxes only on the $60,000. You save about $6,120 in self-employment tax on that $40,000 distribution, but you'll still pay income tax on your total profit either way.
At What Point Should I Switch from LLC to S-Corp?
For the switch to make sense, your business needs to generate enough revenue to justify the extra payroll costs and administrative hassle. The exact number depends on what reasonable compensation for your role would be, what you'd pay for payroll processing, how much time you're willing to spend on compliance, and other factors.
Calculate your potential self-employment tax savings first and subtract the additional costs of running an S-Corp to see what's left.
Can You Have an S-Corp with Only One Member?
Yes, and it's pretty common for entrepreneurs and small business owners. The IRS doesn't require multiple shareholders for S-Corp status. You can be the sole owner and still qualify. You'll just be the only shareholder, the only employee on payroll, and the only person receiving distributions.
Get Clarity with Your Tax Setup and Numbers
At Desi Tax Service®, we guide business owners through their tax journey with precision and care and let nothing slip through the cracks. We can help you figure out whether an S-Corp tax status is the right move for you and optimize your tax strategy for the most savings.
Learn more about our tax services or book a call with a member of our team!
