a single-member LLC unless electing taxation as a corporation is a disregarded entity. Basically for tax purposes no different than a sole proprietorship. a sole proprietor takes no salary. what they take out of the business in the way of profits is not salary. They are taxed on the net income of the business ignoring any payments to the sole proprietor for "compensation"
your options for your spouse - 1)pay her nothing
2) your wife can not be an independent contractor when working for you. you can pay her a reasonable salary for the work she does. keep records in case the IRS ever makes an inquiry. if you do you'll have to file quarterly payroll tax returns and make payroll tax deposits. most likely since she is an employee state law will require you to carry workmen's compensation insurance. if require and yo fail to do so states can impose hefty fines
3) When a Spouse Regularly Takes Part in the Business
In some circumstances, it may be best to make the spouse a member of the LLC when any of the following occurs:
The spouse receives payment for their contribution;
The spouse regularly participates in and is involved with the business; or
The spouse conducts business or interacts with the public on behalf of the LLC.
Make a Spouse a Member of the LLC
When a spouse frequently works in an LLC, one of the best ways to avoid personal liability is to make the spouse a member. An LLC can add new members by following the terms of the "operating agreement." The operating agreement, the document created when the LLC was set up, defines important terms about the management of the company.
In general, operating agreements require all members to agree to the addition of a new member. After the addition of a member, a limited liability company must amend the operating agreement to reflect the changes to the members' interests in voting, profits, and losses. To avoid complications with the IRS, the spouse's voting rights and the rights to profits should reflect more than a zero percent interest.
making your spouse a member will require a means for splitting the net income because a partnership return must be filed. each of you'll get a k-1 reporting your share of the profits. like you she does not receive a salary.
because we don't know all the facts in your situation you should sit down with a tax pro who can advise as to the best alternative.
