How much does an LLC cost per year in 2026?

Filing runs $45-500 once (Texas $300, California $70, Wyoming $100, Delaware $110). Ongoing: most states charge $0-820 a year — California is the outlier at $800 franchise tax + $20 statement, Massachusetts $500, Maryland/Delaware/Tennessee $150-300; Texas, Arizona, Ohio and five others charge $0. Add $100-150/year for a registered agent.

LLC or S-Corp: which is better for a freelancer in 2026?

It depends on profit. Below ~$50-60K stay a sole proprietor. At $60-150K an LLC (liability protection) costs $125-945 a year but saves zero tax. Above ~$80K an LLC with S-Corp election wins: the SE-tax savings ($3,656 gross at $80K, $10,898 at $150K with a 60% salary) exceed $2,000-4,000 of payroll compliance plus LLC/state fees.

What is the California LLC/S-Corp tax in 2026?

California LLCs pay an $800 annual franchise tax plus $20 statement of information. S-Corps pay the greater of $800 or 1.5% of California-source net income (at $150K that is $2,250), filed on Form 100S by March 15. The $800 floor is waived only in the S-Corp first year.

When should I NOT form an LLC or S-Corp?

Below roughly $50-60K of net profit, for side income under ~$10K, or in loss years. A single-member LLC without S-Corp election never pays for itself with tax savings — it is a pure liability bet. California also weakens the S-Corp math: its franchise tax + 1.5% tax reduce but rarely eliminate the advantage (at $150K an S-Corp still nets ~$1,300 more).

LLC vs S-Corp Calculator 2026: Which Saves More?

Q: Does an LLC save tax for a freelancer in 2026?

No. A single-member LLC is taxed exactly like a sole proprietorship — you file Schedule C and pay the full 15.3% self-employment tax on all profit. The LLC adds liability protection and credibility but zero tax savings. Tax savings only appear if you elect S-Corp status (Form 2553), which moves employment taxes off distributions.

Q: Is the S-Corp election free?

Form 2553 itself is free (file within 75 days of formation or by March 15 once a year). The cost is running payroll: $2,000-4,000 a year for payroll service, Form 1120-S and bookkeeping, and you must pay yourself a reasonable salary — the IRS reclassifies token salaries as wages with penalties. In NYC an S-Corp also bypasses the 4% Unincorporated Business Tax above $95K gross.

Compare take-home pay as a sole proprietor, a single-member LLC, and an LLC with S-Corp election — including LLC annual fees by state, payroll compliance, QBI and California franchise tax.

Annual net profit (Schedule C, $)

S-Corp owner salary (annual, $)

Leave 0 for the default reasonable salary (60% of net profit).

State

LLC annual fees vary by state (CA $820/yr vs TX $0).

Show LLC cost breakdown

Does an LLC save tax for a freelancer in 2026?

No — and this is the #1 misconception. A single-member LLC is taxed exactly like a sole proprietorship: you file Schedule C and pay the full 15.3% self-employment tax on all net profit. The LLC adds a liability shield and credibility, nothing else. The tax savings only appear when you elect S-Corp status with Form 2553, which moves employment taxes off distributions. On $80K profit the LLC costs about $125-945 a year and saves $0 of tax; the S-Corp election (on the same LLC) saves roughly $3,656 gross minus $2,500 of compliance.

What does an LLC cost per year in each state?

Zero-annual-fee states include Texas, Arizona, Idaho, Missouri, New Mexico, Ohio, Pennsylvania, South Carolina and Wisconsin. The cheapest overall: Colorado ~$10/year, Minnesota ~$0, Nevada/Hawaii cheap after formation. The expensive ones: California $800 franchise tax + $20 statement (total ~$820), Massachusetts $500, Maine/Delaware/Tennessee/Mississippi $150-300, Maryland $300, North Carolina $200. Budget $100-150/year for a registered agent in most states (required everywhere for LLCs) unless you act as your own — then add your address to public records.

Is an LLC worth it for a freelancer?

As a liability shield, often yes once you have real revenue, clients who could sue, or expensive equipment: forming costs $45-500 once, then $0-820 a year. As a tax move, never — the LLC alone saves nothing. The decision framework: below ~$50-60K profit, sole proprietor (no fees at all); want protection, $60-150K? LLC (small annual cost); above ~$80K profit, LLC + S-Corp election: the SE-tax savings ($4-10K gross) exceed $2-4K compliance, so the whole structure pays for itself. California changes the math — its $800 franchise tax + 1.5% S-Corp tax eat into the savings, but at $150K profit an S-Corp still nets ~$1,300 more than a sole proprietorship.

LLC or S-Corp: is the S-Corp election free?

The election itself (Form 2553, filed within 75 days of formation or once a year by March 15) is free. What costs money is running payroll: $2,000-4,000 a year for a payroll service, Form 1120-S preparation and bookkeeping, plus a reasonable-salary obligation — the IRS reclassifies token salaries as wages and hits you with penalties. On top: California's S-Corp franchise tax (max($800, 1.5% of net income) — $2,250 at $150K), Delaware ~$400 franchise tax, and in NYC the S-Corp election also bypasses the 4% Unincorporated Business Tax that starts at $95K gross.

What's the difference between an LLC and an S-Corp?

An LLC is a legal entity created by your state — it defines liability and ownership. S-Corp is purely a tax election (Subchapter S) you make on top of an LLC or corporation with Form 2553. Practically: LLC = liability protection + zero tax change; S-Corp election = the employment-tax optimization. Most solo freelancers who want both should form the LLC first, then elect S-Corp when profit justifies it. You can also elect S-Corp on a corporation if you prefer that structure.

When is a sole proprietor better than any entity?

Below roughly $50-60K of net profit, or when you're a W-2 employee with a side gig under ~$10K, or in a loss year. The compliance cost of an S-Corp ($2-4K) and even the LLC annual fee outweigh benefits that don't exist yet. If a client requires an entity (many agencies and platforms do), form the LLC anyway — it's a few hundred dollars a year for the shield, and you lose nothing if you never elect S-Corp. This calculator's verdict flips to "sole proprietor" exactly at that break-even point.

Disclaimer

Indicative estimate based on the rules in force on the verification date. This is not tax advice: always confirm with the tax authority, social security office or your accountant, because your own case may involve allowances, deductions or deadlines.

Data verified on: 21.10.2026

How to BECOME

Register with the social security authority for your country and apply for the reduced starter rate if you qualify. The contribution base can be changed 6 times a year.

How to become self-employed

How to become self-employed: step by step

Six steps with the real deadlines and the official links. Order matters: the registration date is what opens the window for the reduced rate and the VAT threshold.

Two questions decide your structure before you invoice anyone. First, IR35: if your client ends the contract and pays a substitute worker, the client checks your status. If your own limited company is between you and the client, that client is outside IR35 — but clients do check. Second, VAT: you must register if your turnover exceeds £90,000 in any 12 months (from 1 April 2025) — the registration threshold is not a tax allowance.
gov.uk — VAT registration threshold →
A sole trader is the simplest and cheapest to set up, and usually best below ~£50-60k profit. A limited company (Ltd) costs ~£50-500 to incorporate plus £0-820/year in accounts and confirmation statements, but moves employment tax off distributions above ~£80k profit. An umbrella company is just a payroll intermediary for contractors inside IR35 — it is not your own company.
gov.uk — set up a limited company →
You must register for Self Assessment by 5 October in the second year after the tax year you started trading (31 October for a limited company). You get a Unique Taxpayer Reference (UTR) within 2 weeks. You then file a Self Assessment tax return each year, normally by 31 January, with a balancing payment by 31 July.
gov.uk — register for Self Assessment →
As a sole trader you pay Class 4 NI at 6% on profits between £12,570 and £50,270, and 2% above — no cap. Class 2 is voluntary at £3.45/week if your profits are below £7,105 (this preserves your state pension and maternity rights). If you are an employee as well, your Class 4 is reduced by your Class 1 contributions.
gov.uk — self-employed National Insurance →
For sole traders you can use the simplified mileage allowance of 55p per mile for the first 10,000 business miles and 25p after (from 6 April 2026) instead of itemising fuel, insurance, repairs, tax and depreciation. You cannot mix methods for the same vehicle in the same year. For a company car, use the Advisory Fuel Rates to work out the benefit charge instead.
gov.uk — allowable business expenses →
HMRC expects tax to be paid in instalments via the Making Tax Digital quarterly updates (payments on account), and charges interest and penalties if you pay late. Separately, a 1099 or SEIS-free freelance contract pays nothing between contracts: budget 20-30% of your rate for unpaid time, pension, holiday and sick pay that employees get for free.
gov.uk — pay your Self Assessment tax →

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LLC vs S-Corp Calculator 2026: Which Saves More?

Does an LLC save tax for a freelancer in 2026?

What does an LLC cost per year in each state?

Is an LLC worth it for a freelancer?

LLC or S-Corp: is the S-Corp election free?

What's the difference between an LLC and an S-Corp?

When is a sole proprietor better than any entity?

Disclaimer

How to BECOME

How to become self-employed: step by step

11. Check your VAT and IR35 status first−

22. Decide: sole trader, limited company or umbrella+

33. Register with HMRC for Self Assessment+

44. Get National Insurance right+

55. Claim your allowable expenses properly+

66. Put money aside for tax and for the gaps+

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