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

At $100,000 profit in Virginia, a sole proprietorship costs $26,895 a year in tax and fees and an LLC taxed as an S corp costs $21,920. An LLC taxed as an S corp starts to cost less from about $50,000 of profit.

$4,975 a year

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

Switching from a sole proprietorship to an LLC taxed as an S corp starts to pay at about $50,000 of profit, with the same settings. Setting up costs $100 once in state filing fees. As an LLC taxed as an S corp this uses the state's pass-through entity tax election, which lowers the cost here.

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

Item	Sole prop	LLC as S corp	Change
Self-employment taxirs.gov, 2026 rates	$14,130	$0	−$14,130
Federal income taxirs.gov, 2026 rates	$8,235	$9,068	+$833
State income tax, after the PTET creditlaw.lis.virginia.gov, checked Oct 23, 2026	$4,530	$1,486	−$3,044
Annual Registration Feelaw.lis.virginia.gov, checked Oct 23, 2026	$0	$50	+$50
Payroll tax on your salaryirs.gov, 2026 rates	$0	$6,362	+$6,362
Payroll service and tax return (estimate)	$0	$1,800	+$1,800
Virginia pass-through entity tax, paid by the company (elected)tax.virginia.gov, checked Oct 23, 2026	$0	$3,154	+$3,154
Yearly cost	$26,895	$21,920	−$4,975

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	$5,970	$7,399	+$1,429
$50,000	$11,590	$11,324	−$266
$75,000	$18,689	$15,023	−$3,666
$100,000	$26,895	$21,920	−$4,975
$150,000	$44,809	$36,910	−$7,899
$200,000	$63,304	$52,709	−$10,595
$300,000	$107,672	$86,655	−$21,017

Federal and Virginia 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 Virginia

File the Articles of Organization (Form LLC-1011) with the state: $100 (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 Virginia 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 Virginia unemployment tax at 2.5% on the first $8,000 of wages. law.lis.virginia.gov See what payroll costs.
Federal return each year: Form 1120-S, due March 15, plus your own Form 1040.
State upkeep each year: Annual Registration Fee, $50 a year, due Last day of the anniversary month of formation.

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 Virginia unemployment tax on the salary. 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 ($100 in Virginia) and electing on Form 2553 is the usual route.

Questions

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

About $50,000 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 Virginia?

$4,975 a year: Sole proprietorship $26,895, LLC taxed as an S corp $21,920.

Does Virginia recognise the S corp election?

Yes. No separate state form is needed.

More for Virginia

Common cases in Virginia

Other states