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!
Focus on investing in the business for growth.
For example… Give yourself a large marketing and advertising budget. Hire an employee. Nice office space. Etc.
After a few years, ideally you’ll be making more than $100k and won’t need to worry about the pension.
Yea, this is the right answer IMO. Take on as much work as possible and use the profits to fund future growth and pay himself W2 earnings not to exceed the cap rate. Then, after the terms earning cap has expired, he’ll be setup to earn more. It’s a really unusual situation and quite fortunate. He could potentially create quite a strong business over the next 15 years. Since he is really forced to pay others for work that he himself could do, he may find out that after 15 years his labor contributions are not even necessary for the business to continue. He might be in a perfect position to sell out entirely.
Don’t forget the easiest one get yourself a little nicer car lease when there are profits to piss away and you know it’s going to go to the IRS end of year