SMLLC Do I need a W-2 for myself?
Do I need a W-2 as a Single-member LLC with no employees? how do I pay myself and file my taxes?
Answer
You pay yourself by writing a check from the LLC to yourself. Profit distribution.
You file your taxes by reporting your LLC's revenues and expenses on Schedule C of your 1040 tax return.
Because the LLC is a pass-through taxed entity, you don't have to withhold taxes on each distribution from the LLC to its member.
Do not setup a W-2 for yourself as sole member of the SMLLC. It's incorrect, confusing, and costly.
Should i pay wages
If i have a single member llc and i am the owner of the entity and the entity is not profitable. Should i still pay wages and issue a W2 to my self to protect against piercing. Can i just have a due to account on the books for accrued compensation to show that i will eventually get paid by the entity.
Answer
Before I can answer your question, I need to ask you a few:
If the entity is not profitable, how are you funding your paychecks?
Are you borrowing money from a bank or other lender?
Are you lending your own money to the llc and taking back a note?
Are you accruing expenses to outside vendors but not paying them, and instead paying yourself?
If you pay yourself "W2" wages (as opposed to taking a draw from your llc's profits), remember that the llc must withhold payroll taxes, pay its share of payroll taxes, and make quarterly deposits of the same.
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Payroll Tax of SMLLC
Can a single member LLC elect to be treated as a Sub S by electing under Form 2553 and pay himself/herself a "reasonable compensation" salary and receive the balance as K-1 profit. Or is all of the income from a single member LLC, electing Sub S status subject to FICA/MED .Is this where I'll see your response? http://www.llc-made-easy.com/single-member-llc.html
Answer
If you select sub-S classification, then your "reasonable" compensation will be subject to FICA/MED, also known as self-employment taxes.
The remainder of the LLC's profits can be distributed as dividends, which are still subject to income tax, but not self-employment tax.
The problem with electing sub-S classification is that there are more rules for sub-S than for an LLC taxed as a partnership or sole proprietor.
For example, every owner of an S corporation must be a natural person (not another LLC, corporation or partnership). If you add partners to your SMLLC, and you wish to allocate profits unevenly between yourselves, then you will lose your S-corp status.
