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Educational Content Disclaimer:** This information is for educational purposes only and does not constitute financial, tax, investment, or legal advice. Individual circumstances vary – always consult qualified professionals before making financial decisions.

If your company brings in more than $5 million each year, choosing between an LLC and an S-Corp has real tax implications. LLCs vs S-Corps both let you separate your personal and business assets, but the way you pay business tax can change your tax liability and how much you keep in your pocket. High-revenue business owners in Los Angeles have specific tax challenges and opportunities, so careful planning can impact your long-term wealth and business growth.

The right structure isn’t just about saving money this year. It’s about hiring the right tax accountant Los Angeles or working with tax advisors Los Angeles who understand local, state, and federal requirements. With the right guidance, you can avoid surprises, maximize deductions, and keep your company positioned for growth.

In this post, you’ll get straightforward strategies for high earners and high-growth companies—whether you want to work with a top tax consultant Los Angeles, a tax accountant San Diego, a tax accountant Las Vegas, or a tax consultant Phoenix. You’ll see exactly how targeted planning can make a difference, and why experienced help matters for business owners at your level.

For a deeper look at entity selection and structure, you can visit this guide on LLC vs S-Corp entity structuring.

Key Tax Differences Between LLCs and S‑Corps

As your company’s revenue climbs above $5 million, understanding the core tax differences between LLCs and S-Corps can have a significant effect on your bottom line. The right strategy helps keep more cash in your business and reduces headaches at tax time.

Tax planning is not one-size-fits-all, especially for Los Angeles business owners facing high state taxes and compliance rules. Below, you’ll find how pass‑through taxation, payroll and compensation, and your company’s home state impact LLCs vs S-Corps for high earners.

Pass‑through Taxation and Self‑Employment Tax Impact

LLCs and S-Corps both use pass‑through taxation, which means profits flow straight to the owner’s personal tax return. Here’s where things split: as an LLC owner, the IRS treats you like a self-employed individual, so you pay self‑employment tax (Social Security and Medicare) on the entire business profit you receive. If your company is bringing in seven figures or more, this can add up fast.

In contrast, S‑Corp shareholders take income in two ways: a reasonable salary (which is taxed like regular W‑2 wages), and distributions (typically not subject to self‑employment tax). This means you only pay employment taxes on the salary portion, not on all business profits.

Key points:

• LLC members pay self-employment taxes (about 15.3%) on their full share of earnings.
• S-Corp owners can split income between salary and profit distributions, reducing employment tax on the distribution piece.
• Both still pay regular income tax, but the employment tax savings for S-Corps can be substantial as profits grow.

Choosing the right structure and working with experienced tax advisors Los Angeles ensures your distributions and salaries are balanced for the greatest tax efficiency.

Payroll, Reasonable Compensation, and Payroll Taxes

Running an S‑Corp comes with a requirement: you must pay yourself a reasonable salary that matches the industry standard for your duties. This salary is subject to payroll taxes, just like any other employee. The remaining business profit can then be paid out as distributions, which avoids payroll tax.

For high-revenue companies, calculating what qualifies as “reasonable” is critical to avoid IRS audits and penalties. Partnering with a skilled tax accountant Los Angeles keeps your strategy compliant and optimized.

When you compare payroll costs:

• LLCs: All company profit is subject to self-employment tax, regardless of whether you pay yourself via payroll.
• S-Corps: Only the reasonable salary is subject to employment taxes; distributions are exempt.

By strategically setting salaries and using accurate payroll tracking, you can often reduce your overall tax bill with an S‑Corp.

State‑Specific Considerations for California and Nevada

Where your company operates matters for taxes and fees. California businesses, including both LLCs and S‑Corps, must pay an annual $800 franchise tax. LLCs may face extra annual fees based on total revenue, which can be significant for high earners. S‑Corps must file an annual report and pay a 1.5% state tax on net income, but do not face the same tiered fees as LLCs.

Nevada, by contrast, has a much more business-friendly tax environment with no franchise tax, no state income tax, and only modest filing requirements. If you operate in both states or have multistate ownership, comparing the annual costs and statutory obligations is essential for efficient planning.

For owners in San Diego or Las Vegas, you should consider partnering with a tax accountant San Diego or tax accountant Las Vegas who understands regional nuances. Multi-state business owners might also find insights from a tax consultant Phoenix, especially if operations cross into Arizona.

Choosing the correct business structure and state of formation requires an integrated approach. The right tax strategy brings not just annual savings but stronger growth and compliance for your company. To review your options and maximize your outcome, reach out to experienced specialists who focus on high-revenue companies. Schedule your appointment and get direct advice tailored to your situation.

Choosing the Right Entity for High‑Revenue Companies

Selecting between an LLC and an S‑Corp is one of the most impactful choices for high-revenue companies in Los Angeles. If your business consistently earns more than $5 million, understanding how entity type affects tax exposure, deductions, and long-term growth is essential.

High earnings create unique business tax planning opportunities, but they can also push you into top tax brackets and change your eligibility for valuable credits. The right structure lets you simplify complexity, maximize deductions, and set your company up to hold onto more of its profits for growth. In this section, you’ll see how key revenue thresholds and deductions shape the LLCs vs S‑Corps decision for high earners.

Revenue Thresholds and Tax Bracket Implications

Once your company’s annual revenue passes $5 million, tax planning quickly moves beyond basics. At this income level, business owners often enter the highest federal and California income tax brackets. For LLCs, all profits are reported as self-employment income and taxed at both federal and self-employment rates. Higher revenue means every extra dollar is subject to additional layers of tax, leaving less left over.

S‑Corps offer a powerful strategy here. Owners split profits between W‑2 salary and distributions. Only the salary portion is subject to employment taxes (Social Security and Medicare), while distributions face regular income tax rates without self-employment tax. This split lets high earners save on payroll taxes as profits climb. For example, a business owner with $8 million in revenue could potentially move hundreds of thousands in income to the lower-taxed S‑Corp distribution category.

Key points to remember:

• Higher income pushes LLC owners into higher marginal tax brackets with full self-employment tax on all profit.
• S‑Corp owners may save considerably on payroll taxes by optimizing the salary/distribution split.
• Structuring your business properly at this stage makes a direct impact on after-tax income.

For a closer look at business tax reduction techniques, you can explore tax mitigation strategies for LLCs and S-Corps.

Impact on Business Tax Deductions and Credits

As profits rise, so do the stakes for optimizing deductions and credits. LLCs and S‑Corps each have unique rules for what qualifies. High-revenue companies often rely on advanced strategies such as R&D tax credits, cost segregation, or new retirement plans to reduce business tax liability.

• LLCs: Flexible but may have more hurdles in qualifying for some credits as compared to S‑Corps, particularly with owner wages and the assignment of income.
• S‑Corps: Generally easier to formalize payroll, supporting eligibility for credits tied to employee compensation and benefits. This structure also positions your firm to take advantage of larger retirement plan contributions or profit-sharing, which can further reduce taxable income.

Tax savings opportunities include:

• R&D Tax Credits: Available to both, but S‑Corps can streamline the reporting and maximize credits tied to payroll.
• Cost Segregation: Breaks your real estate holdings into depreciable components, boosting early-year deductions.
• Retirement Plan Deductions: S‑Corps make it simpler to formalize large contributions for owners and employees.

The right entity helps high-earning owners qualify for more deductions and take advantage of incentives designed for growth. Reliable tax advisors Los Angeles and experienced business tax accountants understand how structure influences credit eligibility and can guide you on maximizing your benefit.

Scenario: $8 Million Los Angeles Business

Let’s compare the real-world tax outcome for a Los Angeles business earning $8 million, looking at both LLC and S‑Corp possibilities.

LLC Example:

• All net profit is reported as self-employment income.
• Owner pays individual federal and state income taxes, plus the full 15.3% self-employment tax on all profits.
• High-revenue means top bracket exposure and maximum payroll taxes.

S‑Corp Example:

• Owner takes a W‑2 salary (let’s say $400,000) that fits industry standards, paying regular income and payroll taxes on that portion.
• The remaining profit ($7,600,000 in this example) is distributed as dividends, avoiding self-employment tax and only incurring income tax.
• This often saves the owner hundreds of thousands, money that can go back into growing the business or building long-term security.

This direct comparison highlights how the right entity structure can fuel business growth, reduce waste, and simplify your financial life. For personalized guidance, consider discussing your specific situation with a tax accountant Los Angeles who understands both state and federal rules for high-revenue companies.

When high net worth and high-revenue are at stake, small details in structure make a big difference in your connection to growth, clarity, and long-term protection. Work with trusted business advisors to lock in the outcomes you want and avoid painful tax surprises.

Advanced Tax Planning Strategies for Both Entities

When your Los Angeles company grows past $5 million in revenue, your tax planning needs to evolve. LLCs vs S-Corps both give you flexibility, but you must look past the basics to take advantage of every tax-saving opportunity. Working with an experienced tax accountant Los Angeles or consulting a business tax expert makes sure you use every strategy available to high earners. In this section, you’ll see practical ways to drive down your tax bill and set your business up for long-term security, regardless of which entity you choose.

Optimizing Salary and Distributions

For S-Corp owners, the real tax advantage comes from smartly balancing your salary and distributions. Here’s how it works:

• Pay yourself a reasonable salary based on industry standards and your actual role. This salary is subject to payroll taxes, just like any employee.
• Take the rest of your business earnings as profit distributions. These are not subject to self-employment tax.

This split means you only pay Social Security and Medicare taxes on your salary, not on all business profits. For a high-revenue owner, shifting income to distributions can translate to hundreds of thousands in tax savings. However, setting your salary too low increases audit risk, so an experienced tax advisors Los Angeles makes sure you strike the right balance while staying compliant.

Example:
If you own an S-Corp with $2 million in profit, paying yourself $400,000 in salary (assuming that matches your role) and taking the rest as distributions can save you significant self-employment tax compared to taking all income as wages.

Leveraging R&D Credits and Cost Segregation

High-revenue companies, whether LLCs or S-Corps, can unlock value with specialized tax credits and deductions:

• R&D Tax Credits: Businesses creating new products or processes in Los Angeles may qualify, no matter the entity. The key is to properly document qualifying activities and expenses. S-Corps often simplify this, thanks to clearer payroll records.
• Cost Segregation: If you own commercial real estate, cost segregation breaks down assets for faster depreciation. By front-loading deductions, you reduce taxable income now rather than years down the road.

Both structures can capture these credits, but S-Corps may streamline payroll-based incentives, while LLCs offer more flexibility in how expenses are allocated. For owners who want to maximize these strategies, partnering with a tax accountant San Diego or seeking guidance from a specialized tax consultant Phoenix means no credits get left on the table.

Remember:
High-revenue companies should review R&D credits annually and revisit cost segregation after every major property purchase or build-out.

Integrating Tax-Efficient Retirement Plans

The right retirement plans can cut current taxes while building security for the future. Both LLCs and S-Corps can sponsor these plans for owners and employees:

• 401(k) Plans: Allow for significant employee and employer contributions, reducing taxable income in the year funded.
• Cash-Balance Plans: Offer even larger, defined benefit contributions. These plans are ideal for owners who want to catch up on retirement savings fast, especially when income spikes.

Combining a 401(k) with a cash-balance plan can help high earners defer taxes on several hundred thousand dollars annually. S-Corps make formalized contributions easy through payroll, while LLCs may need extra documentation to prove eligibility but still unlock the same deductions.

To see how these plans could be integrated into your business, you can explore comprehensive business entity planning options designed for high-revenue companies.

Key benefits of tax-focused retirement plans:

• Large contributions directly lower your business tax for the year
• Attract and retain talent with competitive benefits
• Flexible plan design for both LLCs vs S-Corps based on owner needs

As always, the most effective path is to consult with a trusted tax accountant Los Angeles or tax accountant Las Vegas who understands both structure and retirement plan rules. These strategies lay the groundwork for long-term growth, clarity, and protection for you and your business.

Partnering with Local Tax Professionals

Navigating high-revenue tax planning for LLCs vs S-Corps requires more than checking boxes on a tax return. Smart Los Angeles business owners and high-net-worth families look for professionals who can both stay on top of compliance and build strategies for long-term Business Tax savings.

A local tax accountant or tax consultant brings hands-on knowledge of California and Nevada tax codes, helping you spot risks and find growth opportunities before deadlines sneak up. Let’s look at how these tax specialists support you and why a firm like Herbert Financial stands apart.

Roles of a Tax Accountant and Tax Consultant: Clarify the difference between compliance work and strategic planning

For high-revenue companies in Los Angeles and beyond, it’s important to know the distinction between a tax accountant and a tax consultant. While these roles often work together, they focus on different aspects of your financial picture.

• Tax Accountant:

  Handles traditional compliance work. This includes preparing tax returns, recording transactions, calculating payroll taxes, and ensuring you meet filing deadlines. They keep your business in line with city, state, and federal rules. A tax accountant Los Angeles can catch errors or missed deductions that might otherwise trigger audits or penalties.

• Tax Consultant:

  Looks beyond compliance. Tax advisors Los Angeles develop tailored strategies for reducing Business Tax, structuring entities, and planning retirement funding. Their work is about optimizing your tax position—not just for this year but for the next decade. A tax consultant Los Angeles may recommend converting from an LLC to S-Corp or show how to use cost segregation and advanced tax credits.

For top earners, both skill sets are vital. Reliable tax planning often means your tax accountant San Diego or tax consultant Phoenix is picking up where compliance ends and creative, customized tax strategy begins.

Why Choose Herbert Financial: Highlight full‑service support, free consultation, and the firm’s expertise in entity structuring, retirement planning, and Business Tax optimization

Herbert Financial separates itself by delivering all-in-one support under one roof. Here’s what you get when you work with their team:

• Comprehensive Service:

  You don’t need to juggle multiple firms. Herbert Financial handles entity structuring, advanced Business Tax planning, retirement plan design, estate strategies, and risk management for high-revenue companies. Their service covers every challenge a business owner faces—whether you need help with LLCs vs S-Corps, 401(k) plans, or succession planning.

• Clear Process:

  The firm’s process begins with a free consultation and secure document upload. Then you receive a clear, action-oriented tax plan. This makes the most of your time and ensures no missed savings.

• Expertise Tailored to Growth:

  With a team led by Tania Herbert (visionary tax strategist), Andy Hanna (business development expert), and Theo Minassian (estate planning specialist), you can trust that your strategy is designed for clarity and expansion at every step.

• Specialized Knowledge:

  You benefit from their deep experience with high-net-worth and high-revenue cases. From optimizing payroll for S-Corps to maximizing credits for LLCs, their guidance is both precise and practical.

• Ongoing Support:

  The Herbert Financial team stays with you beyond filing season. They adjust strategies as your business evolves and regulations change.

If you’re comparing entity structuring strategies for LLCs and S-Corps, Herbert Financial’s expertise can help you choose, implement, and manage the best path—while keeping everything simple and transparent.

Ready to take control of your Business Tax picture? Schedule your appointment or reach out to Herbert Financial for personalized advice on building clarity and growth into your financial future.

LLCs vs. S-Corps: Your Top FAQs Answered

Understanding the practical issues behind LLCs vs S-Corps can save you hundreds of thousands over your business’s lifetime. Many high-revenue owners in Los Angeles and beyond ask about tax rules, formation steps, ownership limits, and what setup is right for growth. These are the answers that can help you make solid, confident decisions for your business’s future.

Which Entity Offers the Most Business Tax Savings?

This is often the first question for business owners. If you’re earning more than $5 million in revenue, every percentage point matters. LLCs pass profits through to your personal return and you pay self-employment tax on all business net income. S-Corps allow profit to be split between W-2 salary (subject to payroll taxes) and distributions (not subject to self-employment tax), which frequently drives major payroll tax savings at this level.

Summary of savings:

• LLC: All profit is subject to federal and self-employment tax.
• S-Corp: Only salary is, so larger distributions typically mean lower total payroll taxes.

Ask your tax accountant Los Angeles or business tax advisors to run side-by-side projections for your actual numbers before switching.

What Are the Key Ownership and Management Differences?

LLCs are incredibly flexible and work for single owners or groups. They allow unlimited members and flexible management structures, making them popular for family businesses and partnerships. S-Corps have strict ownership rules: only up to 100 U.S. individuals or certain trusts can be shareholders, and all must be U.S. citizens or residents.

Quick comparison:

Aspect	LLC	S-Corp
Ownership Limits	Unlimited, can be entities	Up to 100, U.S. only
Management	Flexible, any member/manager	Formal officers

When deciding, think about your current and future ownership plans. Complex groups or partnerships may need the LLC’s structure, while S-Corps work best for straightforward U.S.-based ownership.

How Complicated Is Day-to-Day Administration?

LLCs are simpler to run in many states. Recordkeeping is flexible, and there is typically no requirement for annual board meetings or classic “corporate” paperwork. S-Corps require more corporate formalities, including regular meetings, detailed minutes, and timely payroll filings due to the W-2 salary requirement.

In California, both LLCs and S-Corps have annual state fees, and each needs separate annual filings. Solid compliance keeps you audit-ready and protected. A seasoned tax accountant Los Angeles or tax consultant Phoenix can explain which structure will fit your administrative comfort zone.

Are There Special Rules or Pitfalls in California or Nevada?

Yes. Both California and Nevada have unique rules for LLCs vs S-Corps. In California, LLCs often pay additional fees once annual receipts pass $250,000 and must pay the franchise tax, which can hit high-revenue businesses hard. S-Corps in California pay a 1.5% state tax on net income and annual state fees but may avoid the tiered LLC fee structure.

Nevada offers more freedom, with no state income tax and minimal annual reporting for either entity. Multi-state owners should ask a tax accountant San Diego or tax accountant Las Vegas for help with filing and multistate tax planning.

Can You Switch Entity Types As You Grow?

It is possible to switch from LLC to S-Corp status, and many high-earners do this as profits escalate. The IRS allows an eligible LLC to elect S-Corp tax status by filing Form 2553. This changes how profits and payroll are taxed but keeps your LLC’s legal shelter in place. Timing, documentation, and compliance are critical to avoid unexpected costs—a reason to involve your tax consultant Los Angeles early in the process.

What Happens to Retirement Plans and Other Benefits?

S-Corps make it easier to formalize retirement plans like 401(k)s or cash balance pension plans, which are key for high-revenue business owners who want to lower this year’s taxes and boost long-term savings. LLCs can also sponsor comprehensive plans but will need careful documentation to align contributions with tax law and avoid IRS red flags.

For high-net-worth owners, both structures can unlock big annual contributions and allow for strategic profit sharing. If you want the greatest tax savings plus flexible benefits, work with skilled tax advisors Los Angeles and discuss plan design details.

Who Should You Ask for Help?

There’s no universal answer for LLCs vs S-Corps, especially for businesses over $5 million. If you want strategies tailored to your business’s growth, risk, and expansion plans, seek out professionals with deep experience advising high-revenue companies in California. Herbert Financial’s team handles everything under one roof—tax, retirement, advisory, and compliance—making it simple to get clear, actionable advice.

If you want deep support on retirement plan structuring or entity selection, consider exploring tailored business entity planning and tax services designed for high-revenue owners and families.

Schedule your appointment or reach out to ask how Herbert Financial can help you achieve greater clarity, protection, and growth.

Conclusion

Choosing between LLCs vs S-Corps shapes your business tax outcome and your ability to grow with confidence. High-revenue companies in Los Angeles see a direct impact on after-tax income, compliance, and the flexibility to design powerful retirement strategies. When you prioritize clarity and select the right entity, your company is positioned for long-term wealth and protection—not just another year of tax savings. Connect with advisors who know how to guide high-net-worth owners and business leaders through every detail, from structuring to advanced credits and succession.

Schedule your appointment with a tax accountant Los Angeles today to unlock growth and protection.