S corp or LLC

“An S corp saves you self-employment tax” is true, and in New York City it is often beside the point. The city does not recognise the S election: an LLC pays 4% on city profit, an S corporation pays 8.85%. Put your numbers in and see which way it actually falls.

The business

Gross receiptsEverything invoiced, wherever the customer is.

Net profit, before paying yourselfWhat is left after every other expense.

Share of sales to customers in the city — 100%Both city taxes allocate on receipts, so what matters is where the customer is, not where your desk is. Ship it out of the city and this comes down.

What the business does

If it were an S corporation

Salary you would pay yourselfHas to be reasonable for the work. This is the dial the whole comparison turns on.

Payroll service and the extra return, a year

You

Filing as

Do you live in the city

Other household incomeA spouse's wages, investments. It sets which bracket the profit lands in.

Put in a profit and the two come up side by side. The answer is not the same at every size — that is the point of asking.

An estimate, not advice, and the entity choice has consequences well past the first year. Sources: NYC Administrative Code title 11 chapter 5 and the 2025 Form NYC-202 instructions for the Unincorporated Business Tax, its $10,000 services allowance, $5,000 exemption and the credit that clears a liability of $3,400 or less; the NYC Department of Finance General Corporation Tax rate schedule for the 8.85% rate, the alternative base and the fixed dollar minimum; the Form CT-3-S instructions for the New York State fixed dollar minimum; the Form IT-204-LL instructions for the LLC filing fee; and IRS Rev. Proc. 2025-32 with the Social Security wage base for the federal figures.