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RD, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 8784
Experience:  CPA, MBA, Over 10 yrs of experience in tax planning and business consulting..
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I operate as the only employee of a PLLC. I have created a

Customer Question

I operate as the only employee of a PLLC (professional limited liability company). I have created a compensation agreement that pays me a yearly salary of $1.00 and regularly distributes bonus/dividend of $25,000.00 every two months (which I can defer based on the health of the company). All revenue generated by me is property of the PLLC per the compensation agreement. Any money left at the end of the year is dividend to me minus 3 months operating expenses. I am trying to reduce either SE tax or payroll tax. Will this strategy provide any relief? Or, will I still be on the hook for the 15% payroll tax in addition to federal? I also act as the manager as the PLLC.
Submitted: 7 years ago.
Category: Tax
Expert:  RD replied 7 years ago.

AS an employee of a LLC - (if the LLC is filing as a S Corp)- you are required to take a reasonable compensation and pay employment taxes on the same.

Balance profit can be taken as a draw and you will not owe self employment tax on such profit taken by you.



Let me know if you have any question.


Please note: This advice is provided with the understanding that all the relevant facts have been provided by you. Any change in facts might affect the advice given and hence may not be relied on in such cases. Nothing contained in this reply was intended or written to be used, can be used by any taxpayer, or may be relied upon or used by any taxpayer for the purposes of avoiding penalties that may be imposed on the taxpayer under the Internal Revenue Code of 1986, as amended.