Business structure
LLC vs S corp taxes: forms, self-employment tax and deadlines
An LLC is a state legal structure. An S corp is a federal tax election. See how each is taxed, which IRS forms each files, the 2026 self-employment tax math and the Form 2553 deadline.
Prepared by Aldro Accounting · Updated · Sources checked
The quick answer
An LLC is a business structure set up under state law. An S corporation is a federal tax status a corporation or eligible LLC chooses by filing IRS Form 2553, due no more than 2 months and 15 days after the start of the tax year it should take effect. By default the IRS taxes a one-owner LLC on the owner's return (Schedule C, plus 15.3% self-employment tax on net earnings) and a multi-owner LLC as a partnership on Form 1065, while an S corporation files Form 1120-S and passes income to shareholders on Schedule K-1.
An LLC is a legal structure. An S corp is a tax status.
The IRS describes an LLC as a business structure allowed by state statute. Its owners are called members. Most states let individuals, corporations, other LLCs and foreign entities be members, and there is no maximum number of members. A few types of business, such as banks and insurance companies, generally can't be LLCs.
An S corporation is a corporation that elects to pass its income, losses, deductions and credits through to its shareholders for federal tax purposes. Shareholders report that income on their personal returns and pay tax at their individual rates, so the corporate income isn't taxed twice.
So the two aren't opposites. An LLC that is eligible to be treated as a corporation can file Form 2553 and be taxed as an S corporation while staying an LLC under state law. The IRS instructions say an eligible entity that makes the S election is treated as a corporation from the election's effective date and doesn't need to file Form 8832 as well.
How the IRS taxes an LLC by default
Depending on its elections and its number of members, the IRS treats an LLC as a corporation, a partnership or a disregarded entity that is part of the owner's return.
A one-member LLC is disregarded for income tax unless it files Form 8832 and elects to be a corporation. It is still treated as a separate entity for employment tax and certain excise taxes. An owner who is a sole proprietor generally figures net earnings on Schedule C.
A domestic LLC with at least two members is a partnership unless it files Form 8832 to be treated as a corporation. A partnership reports its income on Form 1065, an information return. It generally doesn't pay tax on its income. Profits and losses pass through to the partners.
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| Setup | Federal income tax treatment | Return | Owner reports on |
|---|---|---|---|
| One-member LLC (default) | Disregarded entity | No separate income tax return | Form 1040 with Schedule C and Schedule SE |
| Multi-member LLC (default) | Partnership | Form 1065 | Form 1040, from Schedule K-1 |
| LLC or corporation with an S election | S corporation | Form 1120-S | Form 1040 with Schedule E, from Schedule K-1 |
Form 8832 changes an LLC's default classification. The election generally can't take effect more than 75 days before the date it is filed, or more than 12 months after.
Self-employment tax: the main difference owners compare
Sole proprietors figure self-employment tax on Schedule SE. The rate is 15.3%: 12.4% for Social Security and 2.9% for Medicare. Anyone with $400 or more of net earnings from self-employment must pay it and file Schedule SE.
For 2026, the Social Security part applies to the first $184,500 of combined wages, tips and net earnings. The 2.9% Medicare part applies to all net earnings, with no cap. An additional 0.9% Medicare tax applies above $200,000 for single filers, $250,000 for married filing jointly and $125,000 for married filing separately.
The employer-equivalent half of self-employment tax is deductible when figuring adjusted gross income. That deduction lowers income tax only. It doesn't change net earnings from self-employment or the self-employment tax itself.
An S corporation works differently. The IRS filing chart for S corporations lists Form 941 for Social Security, Medicare and income tax withholding on wages, and Form 940 for federal unemployment tax. The chart for S corporation shareholders lists Form 1040 with Schedule E for their share of income, and Form 1040-ES for estimated tax. Schedule SE isn't on the shareholder list.
Who can elect S corporation status
To qualify, the IRS says the corporation must meet every one of these tests. The election is made on Form 2553, signed by all the shareholders.
- Be a domestic corporation, or a domestic entity eligible to be treated as a corporation
- Have only allowable shareholders: individuals, certain trusts and estates, and no partnerships, corporations or non-resident alien shareholders
- Have no more than 100 shareholders
- Have only one class of stock
- Not be an ineligible corporation, such as certain financial institutions, insurance companies and domestic international sales corporations
Election windows and filing deadlines
Form 2553 is due no more than 2 months and 15 days after the beginning of the tax year the election is to take effect, or at any time during the tax year before it.
Form 1065 and Form 1120-S are due on the 15th day of the 3rd month after the tax year ends, which is March 15 for a calendar-year business. When that date falls on a weekend or legal holiday, the next business day counts. That's why calendar-year partnerships could file their 2025 returns by March 16, 2026.
Form 7004 gets a business an automatic extension of time to file, and it generally must be filed by the return's regular due date. It doesn't extend the time to pay. Any balance is due by the original due date to avoid interest and a late payment penalty.
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| Return | Penalty |
|---|---|
| Form 1065 | $255 per partner for each month or part of a month late, up to 12 months |
| Form 1120-S, no tax due | $255 per shareholder for each month or part of a month late, up to 12 months |
| Schedule K-1 not furnished or incorrect (partnership) | $340 per schedule |
What changes in your paperwork
A default one-member LLC usually adds Schedule C and Schedule SE to the owner's Form 1040. A multi-member LLC files Form 1065 and gives each partner a Schedule K-1.
An S corporation files Form 1120-S and gives each shareholder a Schedule K-1. If it pays wages, it also files employment tax returns such as Form 941 and Form 940. S corporations required to file 10 or more returns of any type in a calendar year must e-file Form 1120-S. Partnerships have the same 10-return e-file rule for Form 1065.
Aldro prepares and files all of these. Our team handles Schedule C, Form 1065, Form 1120-S and their state returns for one flat yearly price that covers everything tax.
Worked example
Say a one-member LLC owner has $200,000 of net earnings from self-employment in 2026 and no wages. Social Security part: 12.4% of the first $184,500 = $22,878. Medicare part: 2.9% of all $200,000 = $5,800. Self-employment tax: $28,678 on Schedule SE. Half of it, $14,339, is deductible when figuring adjusted gross income, which lowers income tax but not the self-employment tax. With $60,000 of net earnings instead, the whole amount is under the cap, so the tax is 15.3% of $60,000 = $9,180. If the same business elected S corporation status, the profit would instead pass through on Schedule K-1 to Schedule E, and any wages paid to the owner would run through payroll on Form 941.
Common questions
How does the IRS tax an LLC by default?
A one-member LLC is disregarded and reported on the owner's return. A domestic LLC with two or more members is taxed as a partnership and files Form 1065. Either can file Form 8832 to be treated as a corporation.
Can an LLC be an S corp?
Yes. An LLC eligible to be treated as a corporation can file Form 2553. It is then treated as a corporation from the election's effective date and doesn't also need Form 8832. It stays an LLC under state law.
When is the Form 2553 deadline?
No more than 2 months and 15 days after the beginning of the tax year the election is to take effect, or any time during the tax year before.
What is the self-employment tax rate for LLC owners in 2026?
15.3%: 12.4% Social Security on the first $184,500 of combined wages, tips and net earnings, plus 2.9% Medicare on all net earnings. An extra 0.9% Medicare tax applies above $200,000 for single filers.
Can a married couple's LLC skip Form 1065 as a qualified joint venture?
No. The qualified joint venture option applies only when the business isn't held in the name of a state law entity such as a partnership or LLC.
Are S corp and partnership returns due earlier than a sole proprietor's?
Yes. Form 1065 and Form 1120-S are due on the 15th day of the 3rd month after year end, March 15 for calendar-year businesses. Form 7004 gives an automatic extension to file, not to pay.
Aldro
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Business tax filing is $399 USD a year, and it covers everything tax for that year.
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What's included
$399 a year covers everything tax for that tax year.
- Every business return for the year. All the federal and state or provincial business returns you need for the tax year: Schedule C, 1065, 1120-S, 1120 and their state returns in the US; T2, or T1 with T2125, in Canada.
- More than one state. Multi-state returns are included at the same price.
- Your personal return. The owner’s personal return (1040 or T1) is included when it’s needed for the business income.
- Quebec. Quebec returns (CO-17, TP-1 and TP-80) are included, and our Quebec pages are in French.
- Extensions and reminders. Extensions (Form 7004 or 4868) and quarterly estimate reminders are included.
- Information returns. 1099-NEC, T4/T4A and T5018 slips are included in the tax price.
- Unfiled past years. Each unfiled prior-year return is $399 per tax year, the same flat price.
- Bookkeeping at $20 a month. Unlimited bank and card accounts, monthly reconciliation and monthly statements.
Payroll processing and sales-tax filing aren’t included in bookkeeping. Prices are in USD. Our team prepares and files your return.
Sources
- IRS: Limited liability company (LLC) · checked October 31, 2026
- IRS: Self-employment tax (Social Security and Medicare taxes) · checked October 31, 2026
- IRS: S corporations · checked October 31, 2026
- IRS: Instructions for Form 2553 · checked October 31, 2026
- IRS: Instructions for Form 1065 · checked October 31, 2026
- IRS: Instructions for Form 1120-S · checked October 31, 2026
- IRS: Internal Revenue Manual 21.7.4 · checked October 31, 2026
This guide explains general rules from the sources listed. It isn’t tax advice for your situation.