Thanks. The situation I plan to be in is like this:
I have a C-Corp that owns an LLC. The LLC represents a project I am working on. I will work on that project in year 1, and let's say it does well and generates a large amount of income (let's say $500,000). The income flows to the C-Corp. I pay myself a salary of $50,000 from the C-Corp, retaining the other $450,000 in the company as profits. In year 2, I no longer work on the project, and it no longer generates any income. Can I take another $50,000 in dividends from the C-Corp, or must I take it as a salary? I would prefer the dividends, since if that's my only income, I would be at the 0% qualified dividend tax bracket. If I took it as salary, I would have to pay payroll taxes and normal income tax on top of the 21% corporate tax I already paid on the income in the first year. Since I did not work on the project in year 2, could I argue that I did not require a salary?
Now lets say in year 3 I begin working on a new project, and start a new LLC owned by the C-Corp. If that project is not yet complete, must I be paid a salary out of those retained profits from year 1 now?
If this doesn't work, is there a better way to structure this? Maybe each project is it's own C-Corp?
I'm just trying to find a way to average out my income over the years from large, inconsistent spikes of income, so that I don't hit the max tax bracket on my good year and then pay nothing in the other years. I'd like to spread it out, paying a rate each year that more closely reflects the average earnings.
