USA Question about Single-member LLC with one employee.

[Moses_1592]

Hello,

I have a question that may not be entirely related to accounting but I figure I could probably find some advice here… First off, I am a dentist who is planning on opening a single-member LLC to operate my business. Currently I am a sole-proprietor operating as an independent contractor at another dental practice. My wife is a stay-at-home mother and as of now is unemployed. I essentially have no overhead or business expenses since I am using another dentist’s office for my business.

I would like to employ my wife through the LLC so she receives some income each week, say, $500, just so she can slowly build and retain a decent credit score and show employment in case she ever needs to apply for another job in the future. I understand that I can take personal draws from the LLC since I am the owner, but is there a way I can pay my wife through the LLC without having to put her on a payroll, withhold unemployment, social security, Medicaid, and all the other complications that come with employee payroll? Is it ok in the eyes of the IRS to just pay her essentially as an independent contractor who provides a service for my LLC (who does my books, deliveries, bills, etc)? I figure that the self-employment tax I am burdened with would be the same since she would pay it as well but her salary/wages would be a deductible business expense, so it should essentially even out.

Is this a tax-legal way to operate? If not then what would be the simplest way to pay my wife monthly for services to the LLC? Again, she is not an LLC member, just an employee in this situation.

Also, are there any limitations on how much I can draw and the frequency I can make draws from the LLC to my personal account?

Thank you!

 

[DTA93433]

In answer to your second question, you can simply make "drawers" regarding your "salary" from your (single-member LLC). This is with the understanding that you are filing as a "disregarded entity" and will not be applying for S-corp status!

In answer to your first question about bringing your wife onboard.....how you treat a worker for tax purposes essentially depends on how much financial, operational and/or behavioral "control" over that worker you have. The more "control" you have the more the individual is considered an "employee" for tax purposes.
The IRS has a guide to help make that determination: https://www.irs.gov/businesses/smal...-employee?_ga=1.42802471.387058541.1469836456. Generally though most workers are more likely than not, actually employees; and thus should have payroll deductions taken out........in addition to the unemployment insurance costs too.