Hi. Single member LLC in MD formed in 2021. I'm the sole member/owner and only worker since inception (may change later but not immediately). IRS has the LLC recorded as a disregarded entity. I'm just catching up to that important distinction.
I've been paying myself as a W-2 employee since June when I started doing contract work. And now I realize that was a mistake. I tripped over the details as I was looking to see how to handle my SEP contribution. I see the 20% for self-employed vs. 25% for employee. And it seems I'm the former, W-2 notwithstanding.
Fixing this for the SEP is important but not urgent since I've got a few months. What's really urgent seems to be deciding how I want to fix the bigger LLC/partnership vs. disregarded entity thing, and the withholding and tax filing issues associated with that.
My guess at this point is I have two choices:
1) Stay single member LLC, stop paying myself as an employee, start handling things as self-employed with flow-through to my personal tax filings. File to recover the employer payroll withholdings that I didn't need to make in 2021.
2) Take on my wife as a second member for the LLC and then stop being a disregarded entity. Be a LLC/partnership. MD is not a community property state and I have zero concerns about loss of control or assets/share to her. That would allow me to be an LLC employee going forward. I'm not sure about looking back to fix 2021, or if I even want this -- is it advantageous?
What do you think? What is important that I have to do by year end? How can I find the right pro to steer me through this and the other things I'm screwing up. I'm in MD just outside NW DC.
Thanks for reading this far and any insights or well-meaning dope-slapping you can offer.
