SUBSCRIBE
Enter your Name and Email address to get
the newsletter delivered to your inbox.
Please include name of person that directed you to my online newsletter so I can thank them personally.
Nolan Accounting Center
4262 South 108th Street
Greenfield, WI 53228
Phone: 414-425-5690
Fax: 414-425-2373
Website: www.nolanaccounting.com
February 2026
February 2026 Client Profile
Ellen, a solo entrepreneur, projects a net profit of $100,000 in her first year. The big question: keep her single-member LLC as a default sole proprietorship or elect S-Corp taxation?
As a sole proprietorship, she pays 15.3% self-employment tax on nearly the entire $100,000 plus income tax after the 20% qualified business income (QBI) deduction, for a total federal tax bill of about $21,630.
By electing S-Corp status and paying herself a reasonable $50,000 salary, only the salary is subject to payroll taxes ($7,650 total FICA). The remaining $50,000 flows as a tax-free distribution. After the same QBI deduction and slightly higher income tax, her total federal taxes drop to about $15,850.
Bottom line: the S-Corp route saves her roughly $5,800 in year one, even after minor payroll service costs.
For profits over roughly $60,000, S-Corp almost always wins for active owneroperators. At $100,000, the choice is clear — electing S-Corp puts thousands more in Ellen's pocket from day one.
Client Profile is based on a hypothetical situation. The solutions discussed may or may not be appropriate for you.
CONTACT US
Enter your Name, Email Address and a short message. We'll respond to you as soon as possible.
The information and opinions contained in this web site are obtained from sources believed to be reliable, but their accuracy cannot be guaranteed. The publishers assume no responsibility for errors and omissions or for any damages resulting from the use of the published information. This web site is published with the understanding that it does not render legal, accounting, financial, or other professional advice. Whole or partial reproduction of this web site is forbidden without the written permission of the publisher.