Sole proprietorship vs S corp in Delaware: which costs less (2026)

At $100,000 profit in Delaware, a sole proprietorship costs $27,315 a year in tax and fees and an LLC taxed as an S corp costs $23,179. An LLC taxed as an S corp starts to cost less from about $52,500 of profit.

$4,136 a year

saved by switching from a sole proprietorship to an LLC taxed as an S corp in Delaware, at these numbers.

Switching from a sole proprietorship to an LLC taxed as an S corp starts to pay at about $52,500 of profit, with the same settings. Setting up costs $110 once in state filing fees.

Delaware, 2026: $100,000 profit, single filer

Item	Sole prop	LLC as S corp	Change
Delaware business licenserevenuefiles.delaware.gov, checked Oct 23, 2026	$75	$75	$0
Self-employment taxirs.gov, 2026 rates	$14,119	$0	−$14,119
Federal income taxirs.gov, 2026 rates	$8,223	$9,550	+$1,327
State income taxrevenuefiles.delaware.gov, checked Oct 23, 2026	$4,898	$5,002	+$104
Payroll tax on your salaryirs.gov, 2026 rates	$0	$6,352	+$6,352
Payroll service and tax return (estimate)	$0	$1,800	+$1,800
Delaware annual LLC taxcorp.delaware.gov, checked Oct 23, 2026	$0	$400	+$400
Yearly cost	$27,315	$23,179	−$4,136

What these figures count

State income tax, and state taxes on the business itself: franchise, LLC, S corp, gross receipts and excise taxes.
Social Security and Medicare on both sides of an owner salary, federal unemployment tax and the state's new-employer rate.
The 20% qualified business income deduction with its income limits and the professional-service rule.
Yearly report fees, and a cost you can change for payroll and the business tax return.

Many S corp calculators leave out state taxes and the QBI deduction, which can make the election look better than it is.

Yearly cost at each profit level

Profit	Sole prop	LLC as S corp	Difference
$30,000	$6,218	$7,968	+$1,750
$50,000	$11,798	$11,918	+$120
$75,000	$18,918	$15,778	−$3,140
$100,000	$27,315	$23,179	−$4,136
$150,000	$45,625	$38,939	−$6,686
$200,000	$64,521	$55,465	−$9,056
$300,000	$108,807	$90,914	−$17,893

Federal and Delaware tax and fees, single filer, revenue 1.5 times profit, default salary for S and C corps. "Difference" is LLC taxed as an S corp minus Sole proprietorship.

What the switch takes in Delaware

File the Certificate of Formation with the state: $110 (fee).
Get an EIN from the IRS (free, online) and open a business bank account in the new name.
Check the business can elect: no more than 100 shareholders, all of them US citizens or residents (no nonresident alien owners), and one class of stock. IRS
File IRS Form 2553 to elect S corp tax treatment, within 2 months and 15 days of the start of the tax year it should apply to. See how the S corp election works.
Register with Delaware as an employer and run payroll for your own salary: federal Forms 941 each quarter, Form 940 and a W-2 each year. New employers pay Delaware unemployment tax at 1% on the first $14,500 of wages. labor.delaware.gov See what payroll costs.
Federal return each year: Form 1120-S, due March 15, plus your own Form 1040.
State upkeep each year: no yearly report fee, due Annual LLC tax due June 1 for the prior year. New for you: Delaware annual LLC tax.

What changes between the two

A sole proprietor pays self-employment tax of 15.3% on 92.35% of all profit, up to the Social Security wage base of $184,500. Taxed as an S corp, the business pays you a salary, and only the salary carries Social Security and Medicare tax. The rest comes out as a distribution.

The election adds costs: a payroll service, a separate business tax return (Form 1120-S), federal and Delaware unemployment tax on the salary, and Delaware annual LLC tax. The calculator counts $1,800 a year for payroll and the return. The IRS expects a reasonable salary for the work, so it cannot be set near zero.

A sole proprietor cannot elect S corp status alone: forming an LLC first ($110 in Delaware) and electing on Form 2553 is the usual route.

Questions

At what profit does an S corp election pay in Delaware?

About $52,500 a year, on the default salary (40% of profit, at least $30,000 where profit allows) and $1,800 of yearly payroll and return costs. Change the salary in the calculator to see how the point moves.

How much does it save at $100,000 in Delaware?

$4,136 a year: Sole proprietorship $27,315, LLC taxed as an S corp $23,179.

Does Delaware recognise the S corp election?

Yes. No separate state form is needed.

More for Delaware

Common cases in Delaware

Other states