Most founders should start with an LLC and only elect S-Corp status once net profit is high enough that self-employment tax savings outweigh the added payroll and accounting cost. Pick an LLC if you want the simplest, cheapest structure or if you are a non-US-resident (you cannot own an S-Corp). Add an S-Corp election later if you are a US person netting roughly $40,000+ in profit and want to cut self-employment tax. The two are not really rivals: an S-Corp is a tax election, while an LLC is a legal entity that can make that election.
LLC = a legal entity. S-Corp = a tax status an LLC (or corporation) can elect with IRS Form 2553.
Default winner for most: LLC. It is cheaper, simpler, and open to anyone — including non-US founders.
S-Corp only pays off above ~$40,000 net profit, where reasonable-salary + distribution splits beat self-employment tax.
Hard stop: non-resident aliens cannot be S-Corp shareholders, so non-US founders default to an LLC (or C-Corp for VC).
StableCorp forms a Wyoming LLC (filing $100–$110, all-in ~$299–$399/yr) and can onboard your existing entity — see pricing.
Is an S-Corp different from an LLC?
Yes — and the confusion is structural, not just terminology.
An LLC is a business entity you form with a state Secretary of State. An S-Corp is a federal tax classification you elect with the IRS by filing Form 2553. An LLC can be taxed as a sole proprietorship (default), a partnership, an S-Corp, or a C-Corp. So "S-Corp vs LLC" is really "LLC taxed by default vs LLC that elected S-Corp status."
Get that, and the decision gets simple.
S-Corp vs LLC: the comparison table
Here is the head-to-head on the factors founders actually weigh.
| Factor | LLC (default) | S-Corp election |
|---|---|---|
| What it is | A legal entity formed with the state | A federal tax election (Form 2553) on top of an LLC or corp |
| Setup cost | WY LLC filing $100–$110; ~$299–$399/yr all-in | Same entity cost + payroll setup + CPA fees |
| Self-employment tax | Paid on all net profit (15.3% up to the SS wage base) | Paid only on a reasonable W-2 salary; distributions are exempt |
| Payroll required | No | Yes — owner must run W-2 payroll and take a reasonable salary |
| Accounting complexity | Low | Higher — payroll filings, Form 1120-S, separate K-1s |
| Best profit range | Any, but ideal under ~$40k net | Typically ~$40k+ net profit |
| Non-US-resident owners | Allowed | Not allowed — shareholders must be US persons |
| Best for | Solo founders, bootstrappers, non-residents | Profitable US-resident owner-operators |
Costs above come from StableCorp's facts sheet; tax mechanics follow IRS classification rules. This is general information, not tax advice — confirm your situation with a CPA.
Choose an LLC if...
The LLC is the default answer for a reason.
You are just starting out or bootstrapping and want the lowest cost and least paperwork.
Your net profit is modest (roughly under $40k), where S-Corp savings don't cover payroll and CPA overhead.
You are a non-US resident — you cannot legally be an S-Corp shareholder, so a single-member LLC (or C-Corp for VC) is your lane.
You want flexibility: an LLC can elect S-Corp status later, so starting as an LLC costs you nothing in optionality.
For solo and bootstrapped founders, StableCorp's default recommendation is a Wyoming LLC: $100–$110 to file and roughly $299–$399/yr all-in to maintain. One caveat for non-residents: a foreign-owned single-member LLC must file Form 5472 plus a pro forma 1120 every year, even with zero activity — and the penalty for missing it is $25,000 per form. Don't skip it.
Choose an S-Corp election if...
The S-Corp is a tax optimization, not a starting point.
You are a US person (citizen or resident alien) — non-residents are barred from S-Corp ownership.
Your LLC nets roughly $40,000+ in profit, so splitting income into salary + distributions meaningfully cuts self-employment tax.
You are willing to run W-2 payroll and pay yourself a reasonable salary (the IRS scrutinizes lowball salaries).
You have a CPA or payroll provider to handle Form 1120-S, payroll filings, and the added compliance load.
The savings are real but bounded: you only avoid the 15.3% self-employment tax on the portion you take as distributions, and the IRS requires the salary portion to be "reasonable" for your role. Below the profit threshold, payroll and accounting fees eat the benefit.
What about a C-Corp?
There is a third path worth naming.
If you are raising venture capital, neither an LLC nor an S-Corp fits — investors and option pools expect a Delaware C-Corp, which is taxed at 21% on profits (with a possible second layer on dividends). That is StableCorp's default for VC-track founders, while the Wyoming LLC stays the default for solo and bootstrapped ones. For the full step-by-step on entity selection and formation, see the full guide.
The bottom line
Start as an LLC; elect S-Corp only when the math demands it.
Because an LLC can elect S-Corp status later, beginning as an LLC keeps every option open at the lowest cost. For most founders — especially non-residents and the early-stage — that is the right call, and the S-Corp election waits until profit makes it worthwhile.
StableCorp forms your Wyoming LLC, gets your EIN, opens a US business bank account, and runs USD + USDC/USDT payments end to end — and can onboard an existing entity if you already have one. See pricing for exact fees.
Sources
IRS — About Form 2553, Election by a Small Business Corporation — https://www.irs.gov/forms-pubs/about-form-2553
IRS — S Corporations — https://www.irs.gov/businesses/small-businesses-self-employed/s-corporations
IRS — Limited Liability Company (LLC) — https://www.irs.gov/businesses/small-businesses-self-employed/limited-liability-company-llc
IRS — S Corporation Employees, Shareholders and Corporate Officers (reasonable compensation) — https://www.irs.gov/businesses/small-businesses-self-employed/s-corporation-employees-shareholders-and-corporate-officers
IRS — Instructions for Form 5472 — https://www.irs.gov/instructions/i5472