LLC or S-Corp?

05/26/25 • 14 min

Which business type is better for self-employed people – LLC or S-Corp? This episode takes self-employment tax a step further with a look at the pros & cons of LLCs and S-Corps, including how S-Corps help self-employed people save on employment taxes (but add more complexity and paperwork). At the end, you should understand the basics of sole proprietors, partnerships, LLCs, and S-Corps, and how each of them gets treated by the IRS when it comes to income & employment tax.

Key Takeaways:

Sole proprietors & partnerships are simple to run, but offer no distinction between owner and business when it comes to income, profits, or liability.
LLCs offer liability protection between owner(s) and business, but they don't change your tax treatment. LLC members get taxed the same way as sole proprietors & partners.
The S-Corp Election allows LLCs to be treated as S-Corps for tax purposes. That means you can treat yourself as an employee and pay yourself a salary.
The remaining non-salary profits avoid employment tax when they flow from an S-Corp to shareholders, but do not avoid income tax.

Links
Send me a question to be answered on a future episode.
Sign up for the Keep It Easy newsletter.
Sign up for weekly Office Hours.
The IRS site on S-Corps

Key Takeaways:

Sole proprietors & partnerships are simple to run, but offer no distinction between owner and business when it comes to income, profits, or liability.
LLCs offer liability protection between owner(s) and business, but they don't change your tax treatment. LLC members get taxed the same way as sole proprietors & partners.
The S-Corp Election allows LLCs to be treated as S-Corps for tax purposes. That means you can treat yourself as an employee and pay yourself a salary.
The remaining non-salary profits avoid employment tax when they flow from an S-Corp to shareholders, but do not avoid income tax.

Links
Send me a question to be answered on a future episode.
Sign up for the Keep It Easy newsletter.
Sign up for weekly Office Hours.
The IRS site on S-Corps

Previous Episode

Franz Nicolay – Musician, Author, & Teacher

Franz Nicolay's new book, "Band People: Life And Work In Popular Music", is all about how working musicians think about their craft, careers, and compensation – a natural fit for this podcast! He is also a working musician, releasing music & touring under his own name, as a member of The Hold Steady, and co-founder of the composer-performer collective Anti-Social Music. It was a pleasure to speak with Franz about life as a musician in NYC, the differences between the music and publishing industries, and more. Franz's question to me: What's the best way for freelance musicians to think about retirement funds?

Key points

Franz discusses his early experiences in music, influences, and what led him to pursue a career in the industry.
How his solo work differs from his band experiences, and the creative freedom it allows him.
His involvement in teaching and mentoring students in the music and writing fields.
Stories from the road, including memorable performances and the impact of touring on his artistic growth.
Advice for aspiring musicians or writers looking to break into a scene.

You can learn more at Franz's website or sign up for his newsletter pianofighter.substack.com.

Ask me a question to be answered in a future episode.
Sign up for the Keep It Easy newsletter.

Thanks!

The Thing We Never Talk About - LLC or S-Corp?

Transcript

Timothy Iseler00:00:00.050

Hi everyone, and welcome to The Thing We Never Talk About, a podcast about personal finance for weirdos.

Timothy Iseler00:00:13.085

My name is Tim Iseler. I'm a certified financial planner and I run my own independent financial advisory business in Durham, nc, helping artists, musicians, and other people with weird jobs take control of their financial lives. You can learn more at iselerfinancial.com. And befor