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Can the owner/founder of an LLC in Ohio has a day job also use that LLC bank account for Direct deposit of my pay checks? Does it help? Taxes higher or Lower? The LLC is active but not being used as a business, its just sitting. The LLC was for something back in 2013 but regardless it is still mine and active. Hoping it is a tax break or useful in some way.
Asked on September 5, 2019 under Business Law, Ohio
SJZ, Member, New York Bar / FreeAdvice Contributing Attorney
Answered 1 year ago | Contributor
You can't do this because LLCs cannot be employees: they are "corporate" entities, not natural persons. An LLC can be a contractor and be paid as a contractor (on a 1099 basis) but only actual human beings can be employees. So the employer could agree to hire the LLC as a contractor, but could not direct deposit an employee's paychecks into an LLC, since the checks' payee would not be a human being. And if the employer did agree to hire the LLC as a contractor, then there would be no withholding for the employee; no payment of social security or medicare for him or her, which means that he or she would get hit with the "self-employment" tax and have to pay that portion him/herself; no contributions to unemployment for him/her; etc. And the employee would likely lose health insurance and paid vacation or sick days, since human beings, not legal entities, get those. It would generally be disadvantageous in a number of ways.
The tax advantage would be that some expenses could be run through the LLC: e.g. if the employee uses a cell phone for work or does some work at home, on his/her own internet connection, he/she could deduct a portion of the cell phone & internet bills; if the employee has to drive for work, may be able to deduct mileage; could possibly deduct some equipment in whole or part (e.g. if he/she has to buy a laptop for work); etc. So the issue would be if the expected reasonable business deductions would make giving up being an employee and the things that come with it worthwhile.
There are no tax advantages other than any possible deductions: your LLC income (less the deductions) is your income and is taxed at your personal rate.