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pmac0677
Level 1

Can I pay myself as a sub-contractor--not an employee--and still take dividends if I own a single-member LLC taxed as a sub-chapter S corp?

 
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tagteam
Level 15

Can I pay myself as a sub-contractor--not an employee--and still take dividends if I own a single-member LLC taxed as a sub-chapter S corp?

@pmac0677 Regardless of how you handle this matter, an S corporation must pay reasonable compensation to a shareholder-employee for services rendered to the corporation.

 

See https://www.irs.gov/businesses/small-businesses-self-employed/s-corporation-compensation-and-medical...

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Carl
Level 15

Can I pay myself as a sub-contractor--not an employee--and still take dividends if I own a single-member LLC taxed as a sub-chapter S corp?

If you filed IRS Form 2553 to have your LLC treated like an S-Corp, then as far as the IRS is concerned it "is" an S-Corp. Period.

YOu certaingly can pay yourself as a sub-contractor. But if you pay yourself as a sub-contractor then that means you will be filing a SCH C with your personal tax return and paying self-employment tax on that money. That's kinda defeating the whole purpose of filing the 2553 in the first place. You've gone around your elbow to get to your thumb, but ended up under your big toe.

 

tagteam
Level 15

Can I pay myself as a sub-contractor--not an employee--and still take dividends if I own a single-member LLC taxed as a sub-chapter S corp?

@pmac0677 Regardless of how you handle this matter, an S corporation must pay reasonable compensation to a shareholder-employee for services rendered to the corporation.

 

See https://www.irs.gov/businesses/small-businesses-self-employed/s-corporation-compensation-and-medical...

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pmac0677
Level 1

Can I pay myself as a sub-contractor--not an employee--and still take dividends if I own a single-member LLC taxed as a sub-chapter S corp?

thanks!

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