Georgia LLC vs S Corp: Self-Employment Tax Math, the Flat 4.99% Rate and Form 600S Costs
Searches for "s corp vs llc georgia" usually come from one of two places: you want to know whether an LLC should elect S status to cut self-employment tax, or you have heard the idea and want the real numbers. Start with this point: an S corporation is a federal tax status, not an entity type. A Georgia LLC or a Georgia corporation elects it by filing IRS Form 2553. Georgia has no S form of its own, and the state filing for the entity is the same either way.
So the question is not which state form to file. It is whether the federal payroll tax savings are larger than the added payroll, bookkeeping and state return costs, and how Georgia's income tax and Form 600S fit in. This guide walks through the formula with a worked example. It is informational content, not legal or tax advice.
What the S Election Changes and What It Doesn't
The state costs are the same whichever structure you choose:
- LLC Articles of Organization: $110 total ($100 filing fee plus a $10 service charge), filed online or on paper.
- Corporation Articles of Incorporation: $110 total on the same basis. A corporation also publishes a notice of incorporation in the county legal organ; the newspaper sets that charge, separate from the $110 (O.C.G.A. 14-2-201.1). Trade name (DBA) notices are a separate requirement.
- Annual Registration: $60 ($50 plus a $10 service charge) for either structure, filed between January 1 and April 1. An LLC files its first registration in the year after it forms. A new corporation files within 90 days of incorporating (a corporation formed after October 1 files between January 1 and April 1 of the next year). Check the Secretary of State Corporations Division for the current window and late penalty.
The S election changes none of those numbers. It changes how the owner is paid and taxed for federal purposes, and that is where both the savings and the added costs come from. Local licensing is also unaffected. Georgia issues no general state business license. Your city, or the county if you are outside city limits, issues the local occupation tax certificate, often called a business license, under its own formula and deadlines.
The Self-Employment Tax Formula
A single-member LLC taxed as a sole proprietor pays self-employment tax on its net earnings. An S election aims to shrink that bill by paying part of the profit as a salary, which is taxed as wages. To redo the math yourself:
- Multiply net earnings by 92.35%. Self-employment tax is figured on that adjusted amount, not on the full profit.
- Multiply the result by 15.3%. That is 12.4% for Social Security on earnings up to the 2026 wage base of $184,500, plus 2.9% for Medicare, which has no wage cap.
- Deduct half of the self-employment tax when you calculate federal income tax.
Applying 15.3% to gross profit, or to the full net profit without the 92.35% step, overstates the tax and inflates every savings figure you calculate. Always start with 92.35%.
A Worked Example on $100,000 of Net Profit
This is a hypothetical. Assume the business clears $100,000 of net profit in a year.
Sole proprietor LLC: 92.35% of $100,000 is $92,350. 15.3% of $92,350 is $14,129.55 in self-employment tax.
S corporation: Assume the owner pays a hypothetical $50,000 salary. Payroll tax on that salary is 15.3% of $50,000, or $7,650. The remaining $50,000 is paid out as distributions, which are not subject to payroll or self-employment tax.
| Item | Sole proprietor LLC | S corporation |
|---|---|---|
| Amount subject to SE or payroll tax | $92,350 | $50,000 salary |
| Self-employment or payroll tax (15.3%) | $14,129.55 | $7,650 |
| Difference before added costs | Roughly $6,480 ($14,129.55 minus $7,650 is $6,479.55) | |
The $6,480 is a gross figure. Every added cost in the next sections comes out of it, and the number moves when your salary moves. A lower salary shows a bigger apparent saving, but it also carries more risk, as explained below.
Reasonable Salary and the Break-Even Rule of Thumb
The salary has to be reasonable for the work you actually do. An owner who performs the same job a full-time employee would perform is expected to draw a comparable wage. A salary set low just to shrink payroll tax invites scrutiny from the IRS. Ask a CPA what a defensible number looks like for your industry and role before you set it.
Many advisors use a rough rule of thumb: the S election starts to make sense once profit is well above a reasonable salary and the added costs are covered. Treat that as a starting point only. The actual break-even depends on your salary, your profit, your payroll setup and what your bookkeeping and tax preparation cost, and this guide does not give a single threshold.
Costs That Come Out of the Savings
- Payroll service or payroll software. You will run payroll each pay period and file payroll tax returns. Get written quotes, since this guide does not list prices.
- A separate business tax return. An S corporation files federal Form 1120-S, while a single-member LLC reports on the owner's Schedule C. Your preparer may charge more for the extra return.
- More bookkeeping. You must track the salary, payroll deposits, owner distributions and your investment in the company.
- Georgia Form 600S and the net worth tax, covered in the Georgia section below.
- State payroll registrations. Once you pay a salary, confirm the withholding and unemployment steps with the Georgia Department of Revenue and the Georgia Department of Labor.
Common Mistakes in S Corp Math
- Applying 15.3% to the full profit. Multiply by 92.35% first, every time.
- Setting the salary at or near zero. An active owner who takes no salary to avoid payroll tax is creating audit risk, not a shortcut.
- Assuming the election lowers Georgia income tax. The Georgia rate is the same under either structure, as shown below.
- Skipping the added costs. A savings figure that ignores payroll, the second return and Form 600S is not a net savings figure.
Georgia's Flat Rate Applies Either Way
Georgia income tax is a flat rate, not a graduated one: 5.19% for 2025 and 4.99% for 2026. The same rate applies to individuals and corporations. An owner of an LLC taxed as a sole proprietor and an owner of an S corporation both pay the individual rate on the business profit that reaches them, so the S election does not create a Georgia income tax saving. Its effect is on federal self-employment or payroll tax, plus the added Georgia filing for the entity.
Georgia Form 600S and the Net Worth Tax
An S corporation files Georgia Form 600S. The Department of Revenue's net worth tax applies to corporations, and to LLCs taxed as corporations, under O.C.G.A. 48-13-70 through 48-13-80. The tax ranges from $0 to $5,000 depending on net worth. As we read the current schedule, net worth up to $100,000 owes $0, and the tax starts at $125 above that and rises to $5,000 at the top. Confirm the current brackets in the Form 600S instructions, because the figures can change.
If your LLC elects S status, expect the Form 600S filing and the net worth tax, and confirm that treatment with the Department of Revenue. A single-member LLC or partnership LLC that is not taxed as a corporation generally owes no franchise tax, which is why the S election adds a cost that the default structure does not.
The Optional Pass-Through Entity Tax
Georgia also offers an optional entity-level tax election for pass-through entities, made on Form 700 or Form 600S. Under the election, the entity itself pays the Georgia income tax on its income rather than leaving it to each owner. The election has its own rules and eligibility conditions. Check with the Georgia Department of Revenue for the current rate and rules before you elect, and do not rely on a rate you find elsewhere until you have confirmed it.
How to Decide
- Estimate net profit before owner pay for the next 12 months.
- Set a defensible salary for the work you do, and document why you chose it.
- Run the 92.35% and 15.3% math on the salary and on the full profit for the sole proprietor case.
- Subtract the added costs: payroll, the second federal return, bookkeeping, Form 600S and the net worth tax.
- Remember that the Georgia flat rate is the same under either structure.
- Have a CPA review the numbers before you file IRS Form 2553.
Official Resources and Related Reading
Use the Georgia Secretary of State eCorp portal for entity filings and the Georgia Tax Center for Department of Revenue registrations. For a side-by-side look at the two structures, read Georgia LLC vs corporation. For formation steps and fees, see how to start an LLC in Georgia.
Disclaimer: This guide is informational content, not legal or tax advice. Tax rates, brackets and filing rules change, and your results depend on facts this guide does not cover. Consult a qualified CPA before electing S status, and an attorney for entity decisions.