MARK KOHLERMain Street Professionals, Main Street Professionals, Main Street Professionals, Main Street Professionals, Main Street Professionals, LLC · Owner at Main Street Professionals, LLC

The $15,300 Tax You’re Paying for No Reason

6 Dec 2025 · 1 min

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1:09

In this video, Mark Kohler explains that single‑member LLCs and sole proprietors are subject to the self‑employment (FICA) tax of 15.3% on every dollar of profit, in addition to federal and state income taxes. He illustrates how this tax functions like the combined employee and employer payroll taxes that would be withheld from a regular paycheck, effectively handing over a 15% “tip” to the IRS before any income tax is calculated. Kohler emphasizes that once a business consistently earns a profit of roughly $40,000–$50,000, the owner should consider electing S‑Corporation status, which can restructure how self‑employment tax is applied and substantially reduce the overall tax burden.

Chapters

They may think an LLC saves them taxes. It does not. Because if you're operating as a single member LLC or sole proprietor, every dollar of profit you make is hit with self employment tax or FICA. That's 15.3% right off the top. Now the purpose of that tax is to cover Social Security and Medicare, and it's on top of your federal and state income taxes. It's essentially if you work for someone else, what they withhold from your paycheck and the employer matches. So the net result is if you net $100,000 as an LLC, you could owe over $15,000 in FICA before paying any income tax at all. Frankly, that's your tip to the irs. You're working so hard and then you just hand over to them another 15% for the privilege of being self employed. But once your business starts producing consistent profit, that 15% does not have to be there. We can change the equation. So when do you make the switch? What's that magic profit zone? I'll tell you. Once you're netting or making profit of around 40 to $50,000 in your LLC, it's time to start looking seriously at an S Corp election. Once you hit that zone, the math flips in your favorite.