Question
Single owner LLC taxed as S- Corp, am I considered an employee?
I live in Washington state and just finished filling out my certificate of formation to form an LLC which is owned and operated by me, and I don't plan on hiring anyone. I am going to elect to be taxed as an S-corporation because of the tax benefits. Now as I'm filling out the Master Business Application there are quite a few questions that end in "Required if you will have employees" (like about unemployment and industrial insurance). Maybe it's just been a long day and I'm reading too much into it, but now I'm wondering, since I'm the owner and will be writing myself paychecks and withholding tax, etc., am I considered to be a hired employee, or is the owner separate from that? I'm just confused because on the application under the employment accounts section, it asks for the number of people I plan to employ, but do not include owners. Since this number would be zero then doesn't it contradict the checking "yes" that I will be hiring employees?
1 month ago - 5 answers
Best Answer
Chosen by Asker
Since you chose the sub-S corporate tax route, you HAVE to be an employee. even though you are an owner (stockholder) you are also and employee. Not all corporations are run by the owner(s). And you have to pay yourself a salary comparable with others in your field. Example, a CPA who forms a corporation and pays himself a salary of $30K and take the rest (say $75K) in distributions will win an audit from the IRS for evading payroll laws (social security especially). Of course, if you don't make enough to pay yourself, you can't take it as salary. But as soon as you are able to, you must pay yourself .
by Herrmann
1 month ago
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Other Answers
As an owner you are never considered an "employee" - check w/an accountant.
by dusty_titus- 1 month ago
yes.. an employee
by kemperk- 1 month ago
Once you elect to be an S-corp, you will become an employee if you provide services to the corporation. And yes, you must pay yourself a reasonable salary, withhold taxes, file the 941, 945, w-2, etc. Be prepared to defend any salary less than net income. The IRS doesn't think you should get a tax advantage with fica/mc just because you incorporate. Oh and you get to pay FUTA/SUTA as well, even though *you* cannot collect unemployment.
by the tax lady- 1 month ago
For TAX purposes ONLY you are treated as an employee of the S-corp, so you have to issue yourself a W-2 at year end for the amount you have taken as salary etc. etc. For ALL OTHER purposes you are still treated as a LLC since this is the legal form of business that you're operating. So you are considered self employed. I am not sure what kind of application you are filling out, but I have helped clients in your situation with bank loan applications and we have listed them as self employed with no employees.
by Pete N- 1 month ago