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The NYC Business Puzzle

LLC vs. S-Corporation: A Data-Driven Decision

The optimal business structure in New York City is not a simple choice—it's a strategic decision that depends entirely on your profit level. This analysis reveals the precise point where the best choice flips.

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Why NYC is Different

The Dual Profit System

Your business has TWO different profit figures due to the Pass-Through Entity Tax (PTET)

Federal Profit
$162,037
Used for SE Tax, FICA & QBI
+
PTET Add-Back
$83,000
Non-deductible for NYC
=
NYC Profit
$245,036
Used for UBT & GCT
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The Critical Discovery

The Crossover Point

$175,500

Below this profit level: S-Corp wins
Above this profit level: LLC wins

Crossover Analysis Visualization
Total tax costs for LLC vs S-Corp across profit levels
Lines intersect at the strategic break-even point
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Your 2025 Projection

At $162,037 Federal Profit

S-Corp Advantage

$1,228

Annual Tax Savings

LLC Total Cost

$22,427

NYC UBT + SE Tax (net of QBI)

S-Corp (40% Salary)

$21,199

NYC GCT + FICA Tax (net of QBI)

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Understanding PTET

The SALT Cap Workaround Strategy

1. The Problem
Federal $10K SALT cap limits state tax deductions
2. PTET Solution
Business pays your state tax as deductible expense
3. Federal Benefit
Lower federal profit = reduced federal tax
4. NYC Add-Back
NYC requires adding back the deduction

Result: Beneficial strategy for both entity types

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The QBI Deduction Advantage

LLC Gets Consistently Larger Tax Shield

LLC QBI Shield
Full Federal Profit
$7,778
VS
S-Corp QBI Shield
Profit After Salary
$4,667

LLC Advantage

$3,111

Annual QBI advantage for LLC

Note: QBI deduction expires after 2025

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Key Performance Metrics

$175.5K
Break-Even Point
40%
S-Corp Salary Ratio
$68K+
LLC Savings at $1M
$3,111
Annual QBI Advantage
Complete Data Table
11 profit scenarios showing detailed tax calculations
Crossover point clearly visible at $175,500
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Your Strategic Roadmap

Step 1: Analyze Your Growth Trajectory

Will your federal profit stay below or exceed the $175,500 crossover point?

Step 2: If Staying Below $175.5K

Choose S-Corporation: File Form 2553 by March 15, 2026. Weigh $1,228 savings against compliance costs.

Step 3: If Growing Above $175.5K

Remain an LLC: Savings grow dramatically with higher profits. Avoid conversion complexity.

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Key Takeaways

Your Current Situation
S-Corp

$1,228 annual advantage at $162K profit

The Tipping Point
$175.5K

Where the advantage flips to LLC

Next Steps

Review annually as profits and tax laws change.
Consider compliance costs vs. tax savings.
Plan entity elections by required deadlines.