Is it possible for a single member to receive PLLC pay? Should he convert the business to an S-corp instead?

My boss has a single-member PLLC, but he wants to start paying himself a salary and receive a W2. From what I understand, a single-member PLLC can’t pay its sole member a salary—money has to be taken through owner draws.

So, my question is: Does he need to convert the PLLC into an S-Corp to take a salary? That seems like a lot of hassle since an S-Corp would have to file its tax return. Also, if he’s already started taking a salary, would it be fine as long as the conversion to an S-Corp happens before the year ends? Or does he need to adjust the payroll and reclassify the salary as an owner’s draw until the conversion to an S-Corp is official?

Thanks :innocent: :innocent:

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S-Corp election had to be made by 3/15, so it’s probably too late for that now. He could try filing a late election, but from what you’ve said, it doesn’t sound like it would apply in this case since he would have needed to treat it as an S-Corp all along.

He really shouldn’t be taking a salary. Not only is it not allowed, but it’s also unnecessary. As a single-member PLLC, all of his income is considered self-employment income, so he’ll end up paying the same taxes whether through a W-2 or an owner’s distribution. By using payroll, he’s just racking up extra processing fees for no reason. Plus, it could complicate things if he wants to contribute to a SEP retirement account.

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What do you mean that he must constantly regard it as an S Corp? It is possible to go back to 1/1/24 with a delayed election and complete some payroll before the end of the year.

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The IRS often rejects late elections unless the taxpayer always intended to be an S corp; in other words, the late election will be rejected if the taxpayer filed as anything other than an S corp in previous years. There are a few more exclusions, but proving them is far more difficult.

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No, it doesn’t. It is not mandatory to have been a S Corporation from the day of your election. I’ve submitted numerous 2553s under 2013–30, and I’ve never experienced a denial. You are not correct in what you say.

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You’re not doing something right if you’re receiving 2013–30 denials. Numerous over the years with no problems. There is no requirement to have intended to be an S-corp from the beginning in the 2013–30 rules. That is simply untrue. Your rejections have to have been due to a separate co-platelet rationale.

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Without an election, a single member LLC is viewed as a disregarded entity. It is therefore handled as though it doesn’t exist. You are not able to use yourself as a source of income.

He would need to choose entity status. It might be organised as a S corporation or a C corporation. However, he ought to receive customised guidance on what is best for his circumstances.