Hello,
I have a landscaping business in Massachusetts operated under an LLC.
My primary residence is in Massachusetts in a 2 family I own with my wife, while my wife’s primary residence is in a single family we own in Vermont.
My wife is on payroll of my MA landscape business on a part time basis, and she has a full time job in VT.
I am on owner’s draw only, no payroll.
My son is my main employee, on payroll. He also rents the 2nd unit of the MA 2 family.
I am looking for advice on the legal entity of the business, and any other entities we should form, and what strategies we could use regarding the real estate properties.
Best Regards
Not an expert but perhaps this will give you something to think about. Sorry, but this won’t be one answer to rule them all (LOTR reference).
The purpose of an LLC is to contain liability. There is no tax benefit to an LLC. So what liability are you trying to contain?
The two family may not need an LLC given you and your son are the tenants. When you start renting to strangers perhaps think of an LLC then. Again, no tax savings from an LLC but more cost and time/effort.
The Landscaping LLC makes sense.
Consider making the “S” election on the landscaping LLC once your income is 40-50k/year. This will limit the amount of payroll taxes you owe from your earnings on the landscaping biz. The rental property already has this benefit as the income from your rentals is considered “passive income” and not subject to FICA taxes. The income from your rentals should be reported on Schedule E.
Owner’s draw’s from a service business is still likely subject to FICA unless you structured it as you just being a passive investor which is different than my experience and you should consult someone. If you are an active player in the LLC, you should be making estimated tax payments quarterly that should cover both income and FICA liabilities whether or not you pay yourself regularly (payroll).
Good luck with your research.