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If not, you might want to go the S corp route so you’ll be covered when you retire. Then again, depending on what comes out of Washington, Social Security and Medicare might not give you much benefit ten or twenty years down the road. It’s a real gamble.

The long and short of the results from meeting with a CPA and attorney are: As an LLC is simpler to run than a true S-corp (less meeting and paperwork requirements), the best structure for me seems to be an LLC with S-corp designation for tax purposes. I’ll get the SE tax break on the pass through profits with less headaches.

“Reasonable” salaries for my wife and I are going to be based on the local economy, since my peers live all over the US and the world and some take the full profits as salary and some are doing what I am doing-setting up an LLC, or corporation, taking partial salary. As the local economy is extremely poor, I can claim a fairly small salary as “reasonable”, but still stand well above the median salary for this area. My CPA thinks this is the best argument I can have, given my situation and it shouldn’t raise any eyebrows at the IRS.

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