Sole-proprietor to LLC?

I have been in business for ten years as a sole-proprietor in Washington state, providing drafting and design services.

My wife is set up as a spousal employee of the company, with a large portion of her compensation as reimbursed medical expenses (using Association 105 through the NASE for this - association105.com). This allows for a larger deduction off the top of the business income, reducing my SE taxes. If I convert my sole-proprietorship to an LLC, will I still be able to retain my wife as an employee?

Answer

There's no rule that says your LLC cannot hire your spouse as an employee, assuming she performs actual work and receives a wage that is reasonable given the services she performs.

You'll need an EIN for your LLC, and you will need to continue withholding taxes from your spouse's paycheck, etc. as you were before as a sole proprietor.