Choosing the right business structure isn’t just about legal protection—it directly affects how much of your income you get to keep.
To help you make a strategic, informed decision, we’ve created a simple side-by-side comparison of common business entities using a sample case.
This article is part of a complete Step by Step Guide called “How to Start Your Business in the United States.” To access it, click here.
At the bottom, you’ll also find a template so you can plug in your own numbers and see how each structure might affect your take-home income.
Sample Case
Let’s assume your business is projected to earn:
- Annual revenue: $150,000
- Operating expenses: $50,000
- Net profit: $100,000
- Your personal marginal tax rate: 24%
- C Corporation federal tax rate: 21%
- Self-employment tax: 15.3%
- Estimated state tax rate: 5%
Tax Burden Calculation
| Entity Structure | Entity Tax | Personal Tax / Distributions | Self-Employment Tax | State Tax | Approx. Net Take-Home |
| Sole Proprietorship | 0% | 24% of $100k = $24,000 | 15.3% of $100k = $15,300 | 5% of $100k = $5,000 | $55,700 |
| LLC (pass-through) | 0% | 24% of $100k = $24,000 | 15.3% of $100k = $15,300 | 5% of $100k = $5,000 | $55,700 |
| LLC Electing S Corp | 0% | – Salary: $60k × (24% + 7.65%) = $18,360 – Distributions: $40k × 24% = $9,600 | Only on salary: 7.65% of $60k = $4,590 | 5% of $100k = $5,000 | $62,450 |
| C Corporation | 21% of $100k = $21,000 | Dividends: $79k × 24% = $18,960 | N/A | 5% of $100k = $5,000 | $55,040 |
Approximate Net Take-Home = Net Profit – (Total of Entity + Personal + SE + State Taxes)
Steps to Customize the Model
- Input your own estimates:
- Annual revenue
- Operating expenses
- Your personal marginal tax rate
- Applicable state tax rate
- Annual revenue
- If considering S Corp election, define a reasonable salary.
- Replace the sample values in the table above with your numbers.
- Compare net take-home under each structure.
Questions to Help You Decide
- What are your projected revenues and net profits this year?
- Which state are you registered in, and what is your approximate tax rate?
- Do you plan to reinvest most of your profits or withdraw them as distributions?
Ready to move forward?
Now that you’ve completed this step, you can either continue exploring the next article in our Start Your Business in the U.S. series or schedule a free consultation with our team. Whether you prefer to learn more at your own pace or want one-on-one guidance to move faster, we’re here to support you.
