LLC vs. S Corp: What’s Best for Your North County Business?

Starting a business in North County San Diego? One of the biggest early decisions you’ll make is how to structure it — and two of the most common options are LLC and S Corporation (S Corp). The right choice could save you thousands in taxes and protect you legally. Let’s break it down.

What’s an LLC?

A Limited Liability Company (LLC) is simple to set up and maintain. It gives you liability protection — separating your personal assets from your business — and offers flexibility in how you’re taxed.

• By default, a single-member LLC is taxed like a sole proprietorship.

• A multi-member LLC is taxed like a partnership.

• But you can also elect to have your LLC taxed as an S Corp.

What’s an S Corp?

An S Corporation is not a type of business entity — it’s a tax election you make with the IRS. You can form an LLC or a Corporation and choose to have it taxed as an S Corp.

The big win?You pay yourself a reasonable salary, and the remaining profit can be taken as distributions — which aren’t subject to self-employment tax.

LLC vs. S Corp: Key Differences

Feature	LLC	S Corporation
Tax Filing	Personal tax return (Schedule C)	Separate S Corp return (Form 1120-S + K-1)
Self-Employment Tax	Paid on 100% of net income	Paid only on your salary
Payroll Requirement	Not required	Required – must run payroll for owner
Maintenance	Simple	More formal: payroll, annual minutes, etc.
Best For	Freelancers, new businesses	Businesses with $80K+ net profit

Real-Life Example (North County)

Let’s say you’re a self-employed consultant in Carlsbad earning $120,000 in net profit:

• As an LLC: You’d pay self-employment tax (15.3%) on the full $120K — about $18,360.

• As an S Corp: You pay yourself a salary of $60K, pay self-employment tax on that ($9,180), and the remaining $60K is a distribution — saving you ~$9,000 in taxes.

When It’s Time to Switch

You should consider switching to an S Corp when:

• Your net profit exceeds $80,000/year

• You’re already using payroll software or a bookkeeper

• You’re working with a tax advisor who can help with compliance

But Don’t Forget…

An S Corp comes with extra paperwork: payroll, quarterly filings, an S Corp tax return, and more. That’s where working with a firm like Cardiff Tax pays off — we’ll help you maximize tax savings without missing key steps.

Still Not Sure Which is Right for You?

We help small business owners in North County every day decide between LLC and S Corp — and set up the structure that saves them the most.