US freelancer & small-business tax map (2026)
This guide matches our US federal & payroll tax load estimator : how a sole proprietor or disregarded LLC, an S corporation, and a C corporation differ for federal income tax, self-employment (SE) tax on net earnings from self-employment, FICA on wages, and corporate income tax. State and local taxes vary widely — our tool uses an illustrative state-rate slider, not 50-state precision. Official references: IRS.gov.
At-a-glance (US federal concepts)
| Structure | Who pays tax on business profit | Employment-style taxes | Corporate tax | Typical trade-off |
|---|---|---|---|---|
| Sole prop / LLC (disregarded) | You, on Schedule C profit (pass-through) | SE tax (~15.3% on net earnings from SE, with IRS caps/wages nuance) | None at entity level | Simplest; full SE tax on profit; unlimited liability (LLC still needs operating agreement for liability) |
| S corporation | Shareholders on K-1 share of profit | FICA only on reasonable salary; residual profit as distribution avoids SE tax | Generally none at entity (pass-through) | Payroll compliance; IRS scrutiny on low salary / high distributions |
| C corporation | Company pays tax on taxable income; dividends taxed again when distributed (“double tax”) | FICA on W-2 wages paid to you / others | Corporate income tax at federal level (+ state for many filers) | Good for reinvesting profits inside the company; expensive cash-out via dividends |
Gross vs net vocabulary (US)
Gross receipts are before expenses; net profit drives income tax for pass-throughs. W-2 wages carry employee + employer FICA (and federal withholding); owner draws from an LLC are not automatically “salary.” The QBI deduction (Section 199A) can reduce taxable income for certain pass-through businesses — eligibility and caps depend on taxable income and industry.