The answer is it depends. Typically, the main tax advantage of an S Corporation lies in potentially reducing self-employment taxes. In an LLC taxed as a sole proprietorship or partnership, all of the business income is subject to self-employment taxes (Social Security and Medicare taxes) for the owner(s). In an S Corporation, only the reasonable compensation paid to owners is subject to these taxes, while remaining profits can potentially be treated as distributions not subject to self-employment taxes. When you elect to be taxed as an S Corp you must start paying yourself and other owners an official paycheck. This means that if you don’t have a payroll system set up you will need to do so. You then pay yourself a reasonable salary (no guidance to exact dollar amount is given by the IRS, but you can imagine it won’t look good if you are paying yourself $100 a month) and collect the rest of the profits of the organization in owner dividends, which are not subject to self-employment taxes. Every LLC will vary in terms of profitability and the amount of owner’s compensation in the form of owner’s draws. It's recommended that businesses consult with tax professionals or financial advisors to assess their specific situation and determine the potential tax benefits of making this election.