Author Topic: Partnership LLC vs Single Member LLC Employing Spouse  (Read 2704 times)

flashpacker

  • Stubble
  • **
  • Posts: 100
Partnership LLC vs Single Member LLC Employing Spouse
« on: August 24, 2014, 03:49:32 PM »
Has anyone else researched the pros and cons of a husband/wife business being set up as a partnership LLC vs. as a single member LLC with one spouse employing the other?

I'm trying to figure out which option is better from tax, costs, and simplicity perspectives.

I see in the comments for this post that Mrs MM commented that her and MMM are a partnership LLC http://www.mrmoneymustache.com/2011/06/08/the-joy-of-self-employment/

Greg

  • Handlebar Stache
  • *****
  • Posts: 1449
  • Location: Olympia, WA, USA
Re: Partnership LLC vs Single Member LLC Employing Spouse
« Reply #1 on: August 25, 2014, 10:01:47 AM »
I'm no expert but employing one person is a lot of hassle and paperwork that might be avoided if it were a partnership.  Depending on where you are, the various agency filings can add up.  I have to notify 5 different government agencies for every employee.  Then there are the three monthly and quarterly reports for each employee beyond the ones for the business itself.

flashpacker

  • Stubble
  • **
  • Posts: 100
Re: Partnership LLC vs Single Member LLC Employing Spouse
« Reply #2 on: August 30, 2014, 01:42:34 AM »
Thanks - that's useful to consider the extra paperwork. I didn't know it was that bad!

WorkingToBeFIREd

  • 5 O'Clock Shadow
  • *
  • Posts: 44
Re: Partnership LLC vs Single Member LLC Employing Spouse
« Reply #3 on: August 31, 2014, 07:32:23 AM »
My wife and I started a business about two years ago and decided to go with a single-member LLC under my name.  From a business structure perspective, it made things easier at tax time as it would be handled the same as a sole proprietorship (but with the added legal protection of an LLC).  Last year we also established a business 401K plan which allowed me to max my personal contributions as the "employee", followed by making a generous "employer" contribution based on a percentage of profits.  If I had employees (spouse may be exempt), I would have to provide the same employer contribution perk to all, so am maximizing it now before we grow big enough to need to hire folks.

My accountant also advised me to avoid hiring employees directly until absolutely needed, as the paperwork, payroll, etc. (especially for only 1 or 2) is quite a bit of work.  Seems like a 1099 contractor might be a good way to go?

I ended up doing all the research and filing my LLC myself (saving about $800 from what my accountant would charge), but probably good to speak with a tax expert on options and pros/cons, especially if this is a "side hustle" versus primary income.

Good luck!