Wife Started a LLC / S Corp

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What advice or hacks do you guys have about solo 401K, writing off expenses, & self-employment tax. She's a Nurse Practitioner and will be working at a Med Spa after years of working at a hospital. She is a 1099 contractor worker so paid hourly plus commission and will be getting health insurance through my company. We met with a CPA to helps setup the LLC but any advice helps.

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I'd lean on CPA but pay herself a reasonable salary. Look up average on Bureau of Labor & Statistics.

Get Mile IQ

You don't need an LLC to take advantage of schedule C deductions, although establishing an LLC, can help you keep track of business expenses better. There's not as much benefit to classifying as a S-corp as there used to be with the QBI deduction taken into account. So hopefully your CPA is helpful in forecasting projected income to determine if the administrative fees and payroll taxes are worth it, if your CPA is truly setting up a S-corp.

Consider opening a business checking account and a business credit card to help keep track of expenses easier. If you pursue rewards, etc. may want to consider a credit card that you can transfer them to your personal account.

Otherwise,

Solo 410k - depends on want to do with it. If you are planning to just do standard investments, index funds, ETFS etc. then you can easily open one up at any of the big brokerages (Vanguard, Schwab, Fidelity, etc). Some differentiation which may be important to you, will be if they allow traditional and roth contributions, if they allow conversions of other 401ks into the plan, etc.

If you want more freedom/flexibility, you can establish a checkbook solo401k(there's several options), but you can not only do the above, but you can also buy real estate and non traditional investments as well.

Hopefully your CPA is offering guidance on eligible tax deductions, but off the top of my head licensing fees, CME/CEUs, uniforms, home office if eligible, mileage deductions if eligible, malpractice/health insurance premiums, etc.

(no message)

I’m not a cpa but I don’t see how you can be a S corp for something like a NP or professional. You are getting paid hourly basicallly. The entire point of an S corp for taxes is to pay your self a salary and revenue outside of that as business income that’s then taken as a distribution by the owning partners.

Maybe the irs technically allows it but it doesn’t pass common sense logic to me unless there’s something like a massive bonus .

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You are getting paid hourly basicallly.

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Has diddley squat to do with it. My business charges hourly most of the time. changes nothing about the invoices i send to my clients to pay my company.

Hers can as well. real simple.

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is to pay your self a salary

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yes, no shite

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and revenue outside of that as business income that’s then taken as a distribution

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yes, no shite

What do you not understand?

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it doesn’t pass common sense logic to me unless there’s something like a massive bonus .

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I’m not a cpa



Maybe don’t post your opinion then.

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The LLC is the contractor and clinic pays the LLC for services performed. Salary from LLC is paid to wife, along with distributions.

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Sure, but that’s by no means the intention. She is getting paid for a singular persons job. CPA’s love to remind me that I need to be able to justify being able to hire someone with the salary I pay my wife and I. NP salaries are pretty easy to find, as an S corp to save money she is going to have to take significant distributions.

I get how it works, it is what it is. I just don’t see how this isn’t an audit waiting to happen.

No, someone like a medical professional is not like another contractor getting paid to show up.

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will save money with no payroll tax on the K1 income

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wrong

the income, since it is generated by her personal services, would be classifed as self-employment income on the K-1 and subjected to SE taxs

If she hired other people to work for her LLC, yeah the profits from their labor isn't subject to SE taxes if used an S corp vs. sole proprietorship

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wrong

the income, since it is generated by her personal services, would be classifed as self-employment income on the K-1 and subjected to SE taxs

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WRONG!

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Ordinary income reported to an individual shareholder on Schedule K-1 from an S corporation is not considered self-employment income. Such income is investment income. It is thus not subject to self-employment tax, nor is it included in the calculation of earned income for the credits that are based on earned income.

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Ordinary business income includes any earnings your company makes through daily operations. Profit from selling a product or providing a service is ordinary business income.

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I have a single owner LLC and I’m the only employee. A SEP IRA works great for me. Much higher contribution limits than anything else I have seen. I love it.