Tax Reduction Letter - Does the Proprietorship Exemption from Payroll Taxes Apply when the Owner of a Single-Member LLC Hires His 15-Year-Old Child?

Article Date:

June 2011

Word Count:

540

Does the Proprietorship Exemption from Payroll Taxes Apply when the Owner of a Single-Member LLC Hires His 15-Year-Old Child?

No! Here’s why.

The single-member LLC is

a proprietorship for federal income tax purposes and

a corporation for federal employment taxes (FICA, Medicare, and federal unemployment).

The Proprietorship

For income taxes, the IRS treats the single-member limited liability company (LLC) as a disregarded entity.1 Therefore, the single-member LLC files its federal income tax return as a proprietorship on Schedule C of IRS Form 1040.2

The Corporation

Unlike the income tax, for federal employment tax purposes, the IRS does not grant disregarded-entity status to the single-member ... Log in to view full article.

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