Posted by John K Haslach, CPA, MST on August 25, 2004 at 20:26:01:
Tom
Glad you found the response useful! What is important for the salary is that it is reasonable for your area for the work you perform. Good luck!
LLC owned by S Corp beats self-employ tax? - Posted by MichaelG
Posted by MichaelG on August 25, 2004 at 01:00:41:
About the only negative I’ve found with an LLC is that, unlike an S Corp., you are subject to the 15% self-employment tax on your bottom-line earnings. With an S Corp., you are only subject to that tax on your salary.
So, is a legitimate way to get around it to own your LLCs in an S-Corp? I can visualize the S-Corp. having no checking account, loans, or accounting and needing the simplest of tax returns because its only income come from the Schedule K’s of the LLC’s it owns.
Anyone have any ideas?
Re: LLC owned by S Corp beats self-employ tax? - Posted by JOHN K HASLACH, CPA, MST
Posted by JOHN K HASLACH, CPA, MST on August 25, 2004 at 09:51:58:
You should keep books and records and have a checking account for your S Corp. The S Corp earnings would not be subject to SE tax on the income which passes through to the shareholder on the K-1, however, without reasonable salary, the IRS could come in and treat all the income as salary subject to the 15.3% Social Security taxes.
RE: LLC owned by S Corp beats self-employ tax? - Posted by Mike G
Posted by Mike G on August 25, 2004 at 18:45:15:
Thanks for your answer.
Yes, I always pay myself a normal salary. (Makes it easier to get mortgages/borrow money by claiming “employment” rather than “self-employment.” Just gotta make the paychecks regular and official and signed by someone other than me, plus make sure my name isn’t in the public records for the corporations/LLC’s.)
Thanks again.
Mike G