Have a Tax Question? Ask a Tax Expert
Hello, Thank you for using justanswer. I can assist you with your questions today.
Unfortunately, as single member LLC you cannot pay yourself a wage as an employee.
The alternative would be to supply your Schedule C or tax returns for the past few years to provide proof of income.
The other alternative would be to prepare internal financial statements to show your cash flow, net worth, and annual profit and loss.
How long have you been self employed?
OK then generally speaking providing your prior year(s) tax returns is sufficient for lenders.
Have you been requested to provide this yet?
I have a bk that year and the combination of that and self-employed status has hurt me. I have a credit score in the low 600's and could not get approved for a car loan with 50% down. Trying to buy house I rent, so that is why I was searching for alternatives.
The auto loan lenders did not even ask. They turned me down right away. Ended up paying cash.
I understand. This is a bit of a tough situation. Unfortunately, you cannot payyourself a wage as an employee (i.e. issue yourself a W-2)
If I changed status to an S-corp would that work?
yes, most definitely that would work. You have to issue yourself a W-2 when you pay yourself from an S-corp.
An S-corp does not generate self employment earnings like an LLC does.
This would be your best option if you have to get a W-2.
Aha. Two questions then. Is there greater personal liability in a S-corp? And can I still have business deductions? (those are last questions.)
No there is actually much less personally liability with an S-corp as compared to a single member LLC.
yes most certainly, all the income and expenses stay in the S-corp. If you want to pay yourself you issue yourself a reasonable salary.
if there is remaining cash left over after your salary you can take this as a distribution, not subject to self employment tax.
The S-corp is generally the optimal structure for self employed folks.
can the money stay in the corp or does it have to go out as a distribution?
I can stay in the corp, or you can pay it out.
here is an entity comparison chart you might find useful - http://www.companiesinc.com/incorporate/entity-comparison-chart.asp
great. looks like best option. thank you
No problem, glad I could help
have a good night
thank you very much