Self employment versus an LLC

(Scottsdale, AZ)

I am presently self employed. If I become an LLC, how does this effect my social security retirement benefits?

Thank you.

Answer

If you continue to pay full FICA taxes on your profits (taxed as a partnership or single member LLC), it shouldn't make any difference. You'll be paying self-employment taxes instead of having withholdings.

On the other hand, if you chose S-corporation taxation for your LLC, and paid yourself a smaller salary than your current self-employment income, then your FICA taxes would be lower.

That would potentially lower your Social Security benefits.