S Corporation vs. LLC: Which Structure Saves You More on Taxes?

Written By Ozzie Sindland

If you own a business here in the Ozarks, choosing the right structure isn’t just a legal formality - it directly affects how much tax you pay and how protected you are personally. Many entrepreneurs I work with in Christian County and the Springfield area start out with an LLC and wonder whether it makes sense to elect S Corporation status as their income grows.

Below, I’ll walk you through the key differences so you can make an informed decision.

What Is an LLC?

A Limited Liability Company (LLC) is the simplest way to set up a business with liability protection. In Missouri, forming an LLC is fast and affordable. By default, your LLC is taxed as either a sole proprietorship (if you’re the only owner) or a partnership.

What that means for your taxes:

  • All your net income flows through to your personal tax return.

  • You pay self-employment tax (15.3%) on your profits, in addition to federal and state income tax.

This setup is easy to maintain and works well for many small businesses in the early stages, especially when profits are modest.

What Is an S Corporation?

An S Corporation isn’t a different entity you form—it’s a tax election you make with the IRS. You can have an LLC or a traditional corporation taxed as an S Corporation.

The main advantage is that you can divide your income between a salary and distributions. Distributions aren’t subject to self-employment tax, which often results in substantial savings.

How this works in practice:

  • You pay yourself a reasonable salary that’s subject to payroll taxes.

  • Remaining profits can be distributed to you without self-employment tax.

  • You’ll file a separate business tax return each year (Form 1120-S) and run payroll.

While it does involve more paperwork, many business owners in Ozark find the savings far outweigh the extra complexity once their profits reach a certain level.

Tax Savings Example

Here’s a simple illustration I often share with clients:

Example scenario:
Your business nets $120,000 a year in profit.

LLC taxed as sole proprietorship:

  • Entire $120,000 subject to self-employment tax (~15.3%)

  • Estimated self-employment tax: $18,360

S Corporation election:

  • You pay yourself a reasonable salary of $60,000 (subject to payroll taxes)

  • Remaining $60,000 is distributed as dividends (no self-employment tax)

  • Estimated payroll tax on salary: $9,180

Estimated tax savings: ~$9,180 annually

Keep in mind: This is a simplified example. Your actual savings depend on your business type, Missouri state taxes, and your overall tax picture.

Other Factors to Consider

Recordkeeping:
S Corporations require more formalities, including payroll processing and quarterly filings. I help clients set up simple, compliant systems so they don’t feel overwhelmed.

Reasonable Salary Requirements:
You must pay yourself a fair wage for the work you do. The IRS can impose penalties if you underpay yourself to avoid payroll taxes.

Eligibility:
Certain types of businesses (like some financial institutions) aren’t eligible. Most small businesses, however, do qualify.

Which Structure Is Right for Your Business?

If your profits are under about $40,000–$50,000 annually, sticking with the default LLC taxation is often the simplest approach. Once your income grows beyond that threshold, electing S Corporation status can unlock significant tax savings.

As a CPA here in Ozark, I work directly with business owners and real estate investors to model the numbers, weigh the pros and cons, and handle the filings. There’s no one-size-fits-all answer—what matters is aligning your structure with your goals and cash flow.

Curious whether an S Corporation could save you money this year?

I offer complimentary consultations for local business owners who want clarity about entity selection and tax strategy.

Let’s connect.
Book Your Free Consultation or call my office at (417) 973-2659.

Ozzie Sindland