Tuesday, February 16, 2010
Confusion abounds: LLCs & Employee vs Self-employed
Hi June--Great website!!!
I am the sole owner of my business--it is a LLC--I do have a salary which my business pays me on a monthly basis.
My question actually has nothing to do with taxes, but rather what do I put down on a HELOC [home equity line of credit] loan application--Employee or Self-Employed(Indie)?
My friend told me--for the purposes of getting a loan--it is always better to be classified as an Employee rather than a Indie. Is this true?
Hello Ty. Thanks, glad you like my site.
Your question came in about 2 months ago so you may have resolved your situation. However, the elements of your question make evident the kind of confusion typical for indies. Perhaps my response will help others.
As I hope or wish all of you would know by now -- if not read here business entity -- LLC -- an LLC is not a tax entity. It is a legal entity. You can be a sole proprietorship LLC. You can be a partnership LLC. You can be a corporation LLC [that would be really silly, tho.]
So, when you say you are an LLC there is no way for me -- or anyone else -- to know what kind of LLC you are.
Ty, you say you are " the sole owner of my business--it is a LLC." That would lead me to assume that you are an LLC structured as a sole proprietorship. In tax jargon that would be an LLC structured as a disregarded entity.
However, you then say that you "have a salary which my business pays me on a monthly basis."
A sole proprietor does not receive a salary.
A sole proprietor has either a profit or a loss from his or her business.
A sole proprietor is an independent contractor.
A sole proprietor is self-employed.
A sole proprietor is an independent professional.
A sole proprietor is an indie.
Only employees receive a salary.
And Ty, you ask "what do I put down on a HELOC loan application--Employee or Self-Employed(Indie)?" Well, you must put what you actually are. If you don't you are submitting a fraudulent document. Not good. I can't tell you what to put because I don't know what you are. And I gather from your question that you may not know either.
You need to talk with the pro who set you up as an LLC. FInd out what kind of LLC you are.
If you formed your LLC online with no professional guidance, well, you have a situation that must be resolved.