Updated 18 April 2026
LLC or S-Corp? The Decision by Profession (2026)
Nine specific profiles. A clear verdict for each. With income thresholds, reasonable salary ranges, SSTB status, and the specific factor most likely to change your answer.
Freelance Software Developer / IT Contractor
Typical net profit: $80,000-$250,000
SSTB Status
No
Salary Range
$90,000-$145,000
Break-Even Threshold
$90,000
BLS OEWS: Software Developers - median $130k national, adjust for location
- +Strong QBI deduction available on distributions (non-SSTB means no phase-out risk)
- +High defensible salary from BLS OEWS data creates meaningful distribution
- +Compliance cost ($2,400-$3,500) easily covered at $100k+ income
Watch out for: In California: state entity tax shifts break-even to ~$110k. Run the calculator.
Independent Management Consultant
Typical net profit: $150,000-$500,000
SSTB Status
Yes (consulting)
Salary Range
$100,000-$175,000
Break-Even Threshold
$80,000
BLS OEWS: Management Analysts - median $100k; Management Consultants (senior) $130k-$175k
- +Net S-Corp benefit $8,000-$18,000 annually at $150k-$500k income
- +SSTB classification means QBI phase-out above $191,950 single / $383,900 MFJ
- +In SSTB phase-out band, S-Corp may reduce QBI deduction - run both scenarios
Watch out for: Above $241,950 single / $483,900 MFJ: QBI gone entirely for SSTB; S-Corp verdict returns to pure SE vs FICA comparison.
Marketing / Creative Agency Owner
Typical net profit: $200,000-$1,000,000
SSTB Status
Borderline (advertising can be SSTB; verify with CPA)
Salary Range
$125,000-$200,000
Break-Even Threshold
$80,000
BLS OEWS: Advertising and Promotions Managers - median $135k; premium for P&L owners
- +Net benefit $12,000-$25,000+ at $300k+ income
- +Non-SSTB determination (if purely advertising/marketing) means full QBI available
- +Multiple employees may mean payroll already being run; S-Corp adds minimal incremental cost
Watch out for: If consulting is a significant portion of revenue, check SSTB classification with CPA.
Solo Dental / Medical Practice
Typical net profit: $200,000-$800,000
SSTB Status
Yes (health)
Salary Range
$130,000-$200,000
Break-Even Threshold
$100,000
BLS OEWS: General Dentists - median $180k solo collection-to-salary ratio 35-45%
- +Net benefit significant at $300k+ even with SSTB limitation
- +High reasonable salary baseline means proportionally high distribution
- +Compliance infrastructure (bookkeeping, payroll) often already in place
Watch out for: QBI deduction eliminated entirely above $241,950 single / $483,900 MFJ for health professionals. At very high income, S-Corp purely a SE vs FICA comparison.
Solo Attorney or CPA
Typical net profit: $150,000-$600,000
SSTB Status
Yes (law, accounting)
Salary Range
$100,000-$175,000
Break-Even Threshold
$90,000
BLS OEWS: Lawyers - median $145k; CPAs - median $80k (solo practitioners often higher)
- +Similar to dental: strong candidate above $120k, SSTB phase-out applies
- +Watson v Commissioner (CPA case) makes reasonable salary documentation critical for this profession
- +High awareness profession: IRS knows legal/accounting professionals often underpay salary
Watch out for: Watson v Commissioner: a CPA paid $24k salary on $200k+ distributions and lost. Document salary analysis rigorously.
Real Estate Investor with Rental Properties
Typical net profit: Varies widely
SSTB Status
No (passive investing)
Salary Range
N/A
Break-Even Threshold
N/A - wrong structure
N/A - real estate should stay LLC partnership
- xS-Corp distributions of appreciated property trigger gain at entity level (unlike LLC partnership)
- xDepreciation pass-through more flexible under LLC partnership Section 704(b) allocations
- xDebt-financed basis: LLC partners get basis from liability share; S-Corp shareholders only from contributed amounts
Watch out for: Real estate active developer (build-and-sell, house flipping) is different from passive rental portfolio. Active development income may justify S-Corp for the operational business separately from the holding LLC.
Ecommerce / DTC Operator
Typical net profit: $100,000-$500,000
SSTB Status
No
Salary Range
$75,000-$150,000
Break-Even Threshold
$70,000
BLS OEWS: General and Operations Managers (small business) - median $100k-$125k
- +Non-SSTB means full QBI deduction available on distributions
- +Net benefit $8,000-$20,000 at $150k-$400k income typical
- +Compliance cost proportionally small at higher income levels
Watch out for: If business involves significant inventory and COGS, reasonable salary basis is operations management, not product margin. BLS comparable wage is the manager/operator role.
Creative Freelancer (Designer, Copywriter, Photographer)
Typical net profit: $50,000-$200,000
SSTB Status
Borderline (performing arts / consulting adjacent; verify)
Salary Range
$45,000-$85,000
Break-Even Threshold
$55,000
BLS OEWS: Graphic Designers - median $58k; technical writers $80k; commercial photographers $50k
- +Often lower reasonable salary baseline than knowledge workers, meaning meaningful distribution even at moderate income
- +Break-even is at the low end of the range
- +SSTB classification uncertain for some creative services; confirm with CPA
Watch out for: Some creative services are SSTB (performing arts, consulting-adjacent). The performing arts SSTB includes actors, artists, musicians. If applicable, QBI phase-out applies above $191,950 single.
Part-Time Consultant / Side Hustle
Typical net profit: $15,000-$40,000
SSTB Status
Varies
Salary Range
N/A
Break-Even Threshold
N/A - below break-even
N/A - income below break-even
- xBelow break-even in every state. Compliance cost ($1,800-$3,500) exceeds SE tax saved
- xReasonable salary eats most or all of the net profit, leaving minimal distribution
- xCheck whether you even need an LLC at this income level
Watch out for: If income is growing rapidly, re-evaluate each year. A side hustle at $32k today may be a $80k primary business in 2 years, at which point election becomes attractive.
What If I'm Between Profiles?
The profiles above give direction, but your specific income, state, and salary determine the actual number. Use the calculator for your inputs.