Not sure if this is the best subreddit to ask so feel free to direct me to a different sub if appropriate.

I worked as a public employee and I had a real bad workplace accident which forced me to retire and now I collect my disability pension benefits. To supplement my pension income, I started a consulting business under a Single Member LLC.

The rules of my pension are that if I make more than what my former position’s base salary, it’s deducted from my pension benefits. For example (not real figures), if the salary of my former job was $100k/yr and my current pension is $50k, I’m only allowed to make an additional $50k. If I make more than an additional $50k, then my pension benefits will be adjusted so that I’ll only make $100k. If I earn more than $100k/yr , then I’ll forfeit all pension benefits. This restriction expires on my 50th birthday which was the pension plan’s earliest retirement age.

I didn’t anticipate making this much money and I really don’t want to “work for free” so I’ll admit it’s a good problem to have.

Can I pay myself as a W-2 employee and file my company’s taxes as an S-Corp? If I file my LLC’s taxes as an S Corp, will the LLC still show on my personal income like it did when I filed as a sole proprietor?

That way I can control my personal income and just invest the rest of the companies profits until I turn 50 which is about 15 years away.

Thanks!

  • UBIweBeHappy@alien.topBEnglish
    1·
    11 months ago

    I think what you needed is a C Corp. Otherwise profits are pass through and show up no matter what.(confirm with CPA, financial advisor…)

    If you’re married another option is have your spouse own a decent chunk of the S corp so distributions shows up as her income and not yours. I can’t imagine the rules of your pension penalizing your spouse for making money. Again talk to a professional…

    I’d be curious what steps you took to get your consulting business up quickly. Congrats!

    • SpiritedEngineering6@alien.topOPBEnglish
      1·
      11 months ago

      The pass through income is exactly what I was concerned about. I’ve been working as a W2 government employee my entire life so it’s all new to me.

      And apparently my engineering skills are more valuable in the private world than in the government world so when my friends in the industry heard, they started referring me to their clients and it kinda snowballed from there. I’m truly blessed because I was really depressed and then COVID happened so I think my colleagues were just trying to keep me busy and out of my head at first.

    • Aim_Fire_Ready@alien.topBEnglish
      1·
      11 months ago

      A C Corp is very unlikely to benefit OP in this case. The double taxation and high Corp tax rates are vicious.

      An S-Corp with the spouse as part/majority/entire shareholder is a good idea though if it allows OP to legitimately satisfy the conditions of his pension.