Single member LLC, no employees, should I elect S-...
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evgirl
Returning Member

Single member LLC, no employees, should I elect S-corp tax treatment?

Single member LLC. Should I elect S-corp tax treatment or just keep it as a standard SMLLC? I would be a consultant and have no employees. I already pay payroll taxes and make $250k. 
3 Replies
VolvoGirl
Level 15

Single member LLC, no employees, should I elect S-corp tax treatment?

What payroll taxes do you pay if you have no employees?  Do you also have a separate W2 job?

Carl
Level 15

Single member LLC, no employees, should I elect S-corp tax treatment?

The owner of a single member LLC does not, under any circumstances and with no exceptions, issue themselves any type of tax reporting document, be it a W-2, 1099-MISC or anything else. There are no exceptions.

If you elect to file IRS Form 2553 to have your single member LLC treated like an S-Corp, understand that this would be for *TAX* *PURPOSES* *ONLY* and absolutely nothing else. So what tax benefit are you expecting to get by doing that? That is not a rehtorical question either. There very well could be valid reasons. If so, then what are your reasons?

Now take note that if you elect to have the IRS treat your LLC "like an S-Corp", then as are as the IRS is concerned, it ***IS*** an S_Corp. Of couse, the owner of an S-Corp *can* also be a W-2 employee of that business. But understand this:

 - If you want the IRS to treat your business like an S-Corp, then you business must "act" like an S-Corp. That means the business must follow all federal and state laws, rules and regulations that apply to an S-Corp. Failure to do so will result in penalties that *will* be steep.

 - Keeping in mind that the S_Corp election is for tax purposes only, if someone sues you that S-Corp election will not provide you any protection for your personal assets. Remember, the S-Corp election is for "Tax Purposes Only", and nothing else. So a state judge presiding over a suit against you is not bound by any law to treat your business like an S-Corp, but may instead treat it like the disregarded entity it is when dealing with legal matters having nothing to do with taxes.

So if you "really" need to protect your personal assets from potential legal action against you, then you should register your business "as" an S-Corp and ensure that any and all business assets are actually owned by the S_Corp, and not by you. Personal assets being used by an S_Corp in the production of income can open the pathway to your personal assets for a claimant pursuing legal action against you.

IN other words, you need to seek professional help if you can't make an informed and educated decision on your own, on what is best for *YOU*.

 

evgirl
Returning Member

Single member LLC, no employees, should I elect S-corp tax treatment?

Hi! Yes, I do have a separate W2 job that is full time.  I am setting up an LLC for side business as a consultant. I would like to "pay" myself only if I actually make money in the LLC. Of course, if it works out more beneficial from a tax perspective as a S-corp tax election to pay myself a regular salary, I would. 

 

My concern is can I save taxes with an S-corp election while keeping the liability separate in an LLC?  I will set up separate bank and credit card acc's of course. I am a NYC resident in case that matters and I hope to make a total AGI of over $250k.

 

Thank you!

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