Ask Me Help Desk

Ask Me Help Desk (
-   Accounting (
-   -   Single Member LLC or Partnership (Husband/Wife) LLC (Tax Advantages) (

  • Dec 17, 2007, 06:44 PM
    Single Member LLC or Partnership (Husband/Wife) LLC (Tax Advantages)

    My wife is winding down to her last semester in college and has already gotten really busy with freelance work. In the midst of all this work is contracts, deadlines, and money. On the side we have been doing photography work for a little over a year now, but will no doubt get a lot busier.

    To help protect our personal assets I would like to create an LLC. My question is, which form of LLC fits us better (tax wise)?

    I work full-time as a systems analyst and earn around $60K/year, and work part-time with an income of up to $10K. So say combined I'm at $70K/year.

    My wife is currently working part-time while in school and will show around $15K.

    In the business over the next year we will for sure see $15K, if not more.

    So with the Self-Employment cap on taxes being at $97,500 should we create a single member LLC under myself and hire my wife as an employee and save a lot on taxes down the road? Outside of expenses I would pay her a big portion of the profits. Or would it be better to pay myself more to try and meet that $97,500 SE tax limit?
    Create a partnership LLC between the two of us and both pay SE tax?
    Just put her as the Single Member LLC?

    Any help would be greatly appreciated. Please let me know if you have any questions.
  • Dec 17, 2007, 07:22 PM
    I run across this question a lot. I believe that your insurance company can provide you with an personal umbrella policy that covers your business activity. It's fairly inexpensive (probably cheaper than incorporation fees) and allows you to operate the business with asset protection, and remain a sole proprietorship.

    Once you have a better idea of the business performance (or even if you want to continue), then you can meet with a tax accountant or tax lawyer who is familiar with the incorporation laws in your state.

  • All times are GMT -7. The time now is 01:53 PM.