2026 tax year · North Dakota
Is an S-corp election worth it in North Dakota?
On $100,000 of profit the election saves about $5,171 a year in North Dakota, after everything North Dakota charges the company.
Work it out on your own numbers
The figures below use $100,000 of profit and our standard assumptions. Put your own in instead, this compares staying a sole proprietor against electing, with North Dakota's own charges on the company included:
Salary share and withdrawal share are percentages. The withdrawal figure only affects the C corporation, it is what decides whether the second layer of tax applies at all.
Enter your figures above and press Compare.
What the election is worth on $100,000 of profit
A single filer taking the standard deduction, paying themselves 40% of profit as salary, with $1,500 a year of payroll and filing cost:
| Tax as a sole proprietor | $23,256 |
| Tax as an S-corp, federal and personal state | $18,085 |
| Saving from the payroll-tax split alone | $5,171 |
| What North Dakota charges the company | − $0 |
| Net saving | $5,171 |
- Withholding for out-of-state shareholders. North Dakota makes the company withhold or pay on behalf of shareholders who live elsewhere. It is a real obligation of the company, not of you personally, and it depends on who owns it.
The profit range where it actually pays in North Dakota
From about $20,000 of profit upwards. Below that, the $1,500 of payroll cost is more than the saving.
| Net profit | Sole proprietor | S-corp, all in | Difference |
|---|---|---|---|
| $60,000 | $12,241 | $9,149 | saves $3,093 |
| $100,000 | $23,256 | $18,085 | saves $5,171 |
| $150,000 | $39,359 | $31,467 | saves $7,892 |
| $250,000 | $69,352 | $62,171 | saves $7,182 |
What North Dakota does differently
North Dakota taxes the profit either way. Whether you take it as self-employment income or as salary plus distribution, roughly $1,023 of North Dakota income tax sits on $100,000 of profit, the election moves the payroll-tax half of the bill, not the state half.
The North Dakota detail
North Dakota taxes a federal S corporation the same way with no separate election, no entity-level income tax and no minimum, but the S corp must withhold at the highest individual rate from each nonresident shareholder's distributive share over $1,000 unless they join a composite filing.
How much salary to pay yourself
Enter your figures above and press Calculate.
Less salary means less payroll tax, so the arithmetic always points at the smallest salary you can justify. That is exactly why it is not a number to optimize: compensation has to be reasonable for the work you do, and the penalty for getting it wrong is reclassification plus back payroll tax. The cheapest row here is the riskiest one.
| Salary share | Salary | Distribution | Total tax | vs sole proprietor |
|---|---|---|---|---|
| 20% | $20,000 | $76,970 | $14,510 | $8,747 |
| 30% | $30,000 | $66,205 | $16,297 | $6,959 |
| 40% | $40,000 | $55,440 | $18,085 | $5,171 |
| 50% | $50,000 | $44,675 | $19,873 | $3,384 |
| 60% | $60,000 | $33,910 | $21,660 | $1,596 |
What this assumes
- Single filer, standard deduction, the business as the only income.
- 40% of profit taken as salary in the headline figures.
- $1,500 a year for payroll and a separate 1120-S, a cost estimate, not a tax figure, and it varies by provider.
- Comparing against a sole proprietorship. If you already trade through an LLC, some state fees are owed either way and are not a cost of electing.
- Anything listed as not modeled above is genuinely owed, it is excluded because it does not depend on profit, not because it is nil.
What these words mean
- Distributive share
- Your slice of a business’s profit when it is owned by more than one person, or held through an S corporation or partnership. It is taxed to you whether or not the money is actually paid out.
- Nonresident
- Someone who earns money in a place without living there. Most states and cities tax non-residents only on what they earned inside the boundary, and residents on everything.
- Entity level
- A tax charged to the company itself, before any profit reaches the owners, as opposed to a tax the owners pay on their own returns.
- S corporation election
- Asking the tax office to treat your company as a pass-through, so profit is taxed to you rather than to the company. The owner takes a salary and the rest as a distribution, which is what saves payroll tax.
- Distribution
- Profit paid out to a company’s owner that is not salary. It is not subject to payroll or self-employment tax, which is the whole point of the S corporation election. And why the salary has to be defensible.