Should You Hire Your Spouse Inside Your LLC or S-Corp?
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If you own a LLC or S Corp and married, should you hire your spouse inside your LLC or S-Corp? Should you put your spouse on payroll? Karlton Dennis goes over why it might be good idea use this tax reduction strategy and when it might not depending on your situation.
Here are some tax deduction tips that can help you save you massive amounts of money on your taxes and stay on top of your business finances.
In this video we discuss: Should You Hire Your Spouse Inside Your LLC or S-Corp?
Watch this video until the end to avoid overpaying Uncle Sam and to start making the most out of your real estate business!
*Disclaimer: I am not a financial advisor nor am I an attorney. I am a licensed Enrolled Agent. This information is for entertainment purposes only. It is highly recommended that you speak with a tax professional or tax attorney before performing any of the strategies mentioned in this video. Thank you.
*Disclaimer: I am not a financial advisor nor am I an attorney. This information is for entertainment purposes only. It is highly recommended that you speak with a tax professional or tax attorney before performing any of the strategies mentioned in this video. Thank you….(read more)
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Hiring Your Spouse Inside of Your LLC: Tax Benefits Explained
Hiring your spouse within your limited liability company (LLC) can be a strategic move that not only strengthens your business but also comes with several tax benefits. By bringing your spouse onboard as an employee, you can take advantage of certain deductions and reduce your overall tax burden. In this article, we will explain the tax benefits of hiring your spouse in simple terms.
1. Deductible Salary Expense:
When you hire your spouse as an employee, their salary becomes a deductible expense for your business. This means that you can deduct their salary from your LLC’s revenue, effectively reducing your taxable income. By paying your spouse a reasonable salary, you lower your overall tax liability and retain more of your business earnings.
2. Health Insurance Deduction:
If your LLC provides health insurance coverage for employees, including your spouse, you can deduct the cost of premiums from your business income. This deduction can significantly reduce your taxable income, resulting in lower taxes for your business. However, it is important to ensure that your spouse’s coverage is in the name of the LLC and complies with IRS guidelines.
3. Retirement Contributions:
Hiring your spouse also opens the door for additional retirement contributions. By enrolling your spouse in the LLC’s retirement plan, such as a 401(k) or Simplified Employee Pension (SEP) IRA, you can contribute funds on their behalf. These contributions are tax-deductible for the LLC and can grow tax-deferred until retirement. This not only allows you to save for your spouse’s retirement but also provides a tax advantage for your business.
4. Social Security and Medicare Savings:
When you hire your spouse, the IRS allows for potential savings on the Social Security and Medicare taxes you pay. As an LLC, you are required to pay a 15.3% self-employment tax on your business profits that consists of Social Security (12.4%) and Medicare (2.9%) taxes. However, by employing your spouse, you can shift some of your overall income from being subject to both portions of the self-employment tax to only being subject to the Medicare portion. This can result in significant tax savings for your business.
5. Income Splitting:
Hiring your spouse allows for the opportunity to split income, especially if you are in a higher tax bracket. By paying your spouse a reasonable salary, you can effectively split business profits, lowering the overall tax rate on that income. This method can help manage your tax liability and keep more money in your pockets.
It is crucial to note that all these tax benefits come with certain conditions. Hiring your spouse should be done for legitimate work that benefits the business. The salary paid must be reasonable and reflect the market value for the services provided. It is advisable to consult with a tax professional or an accountant experienced in small business tax planning to ensure compliance with IRS regulations.
In conclusion, hiring your spouse within your LLC can provide numerous tax advantages while strengthening your business and personal finances. From deductible salary expenses to retirement contributions and income splitting, utilizing these tax benefits can help reduce your tax burden and increase your business’s profitability. Remember to seek professional guidance to ensure you meet all legal requirements and reap the maximum benefits while staying compliant with tax regulations.
Flawless Victory‼️ Extremely helpful
I like the idea of making my husband a co-owner but I also like to keep a woman business owned status. will it be ok if he owns only %40??
where can i contact you?
OMGosh you literally just turned the lights on for my husband and I!! Thank you!!!
You didn't differentiate between a multi-member LLC and an LLC taxed as an S-Corp. Please clarify.
Nice video. If your spouse is an integral part of your LLC (on 1099) , is it better to have him/her as a partner or employee? From a tax perspective
So my husband is a travel nurse, do you have any suggestions on if we should start an llc in connection with this and start writing off more?
The thing I am concerned about is when it comes to liability issues single member LLC is treated as a sole proprietorship meaning your not really protected if you get sued. So what is the point of having an LLC? I know adding another member (spouse, family member, etc) solves this but what are issues that might come up later?
Thank you so much. This video was outstanding and helped me make some key decisions when structuring an LLC with my wife.
What about adding children as employees or owners of the business? What are the pros and cons about that? I've read that people can add their children to reduce the tax burden on an LLC.
Question if u pay spouse as salary wouldnt they have to pay self employeed taxes plus what ever tax bracket they fall into
Great Channel! I wish I would of discovered you sooner.
I have a LLC question, so I currently have my wife as a member, something like 90%/10%, I thought this was a good idea if something was to happen to me and it would be easier for her to take over. The question is, I am thinking of just removing her and also switching to a S-Corp for 2022. I think the tax savings is a sure thing and she wasn't on the payroll anyway. So should I remove her, keep it the same or 50/50?
Thanks in advance.
I am enjoying the positive approach that you show in explaining all of these information that is making me understand all these rules regarding taxes. I applaud you Sir.
if I'm paying multiple kids as employees I'm paying payroll taxes anyways so why not just add her as another employee since I'm going down this road
What about 1099 spouse in trucking industry
I’m so glad I found your channel. Thank you so much for this valuable information.
Great information. But I would like one clarification that it dosen't look like you covered: 1099 contracting a spouse.
Seriously social security is a bankrupt program why even mentioned as a benefit it discredits the rest of your points
The crypto market has been favourable in the past weeks, I keep missing out on this opportunity, I'm most certainly very impatient how can I ever make a profit in the cryptomarket…….!
I have learned more from you in two short videos then my CPA in ten years. As a former teacher and current business owner, simply put, you can teach. Wow, Amazing Information!
If my llc is taxed as an s-corp, can I still avoid putting my wife on payroll With the co-owner method?
Can you PLEASE explain how the spousal exemption works?
Does this also apply to an S-corporation as well?
Thank you
Thats exactly what I’m looking for. Initially thought having the co-owner complicates things or paper work as we have small LLC(just we manage it). Now how do I make my spouse co-owner.
How about 1099?
Excellent
Great job
You literally answered my ultimate question I've been trying to get the answer for on the last one! I added my wife to our new LLC also as owner . I was a bit worried if we needed to remove her before the year end if we were going to get hit with some crazy taxes. Need to find a GOOD CPA / accountant the last one I had sucked! But I learned a lot ** How about a video on how to find a good accountant / cpa .. what are some things you should look for / questions to ask before you find out they suck after it's already too late and been paying them already.. Your channel is filled with so much valuable information that help us regular people understand information easily absorbed. keep hustling!
I like that you tell multiple ways to go about this. Thank you
I love all this information thank you so much.
Hi Karlton, Have ??? In LLC as S-Corp, are you required to pay workman's compensation as Employee?
Thank you
I am currently working on starting a business in CA (hopefully up and running by January '22) and would very much like to work with you. Love your videos. Very informative and interesting. Thank you for your great content.
Very thankful
I live in Arizona during the cold months. I just bought some vacation rental cabins in Michigan. Should I call someone in Michigan to set up an LLC? Or can I use someone in AZ? We bought the cabins in 2021 and have spent money on maintenance but don’t expect any income until June, 2022.
Can you be your own payroll or you have to hire a company like ADP?
Sir….I need HELP!!
Thank tou
Ok