Disregarded LLC If their form is a payroll enrollment, pause

Same adjective, different agency

Income tax can ignore a one-owner company and still leave that company as the employer for payroll taxes. A glossary answer pasted into an enrollment will either hide the company from a payday system that needed it, or invent wages for an owner whose draws are not wages. Both mistakes are expensive, and neither one is fixed by checking the other box faster.

This page will not reteach the employment-tax rule. The IRS writes that page, and it is the page to read before an enrollment is finished. What we will say here is the pause. Stop when the form is about hiring, withholding, or a payroll provider, even if the adjective is familiar. Send the enrollment screen before you finish it.

Setup, and then a provider you run

If the company truly needs payroll, the work we can do is the setup. Registrations, a sensible chart, a provider you choose and you run, and a clear line between an owner's draw and a wage. We do not press payday. We do not file the deposits. The provider you run does that, on a calendar you can see.

Reasonable pay belongs in the conversation only after a corporate election is actually in force. A company still living on the owner's personal return does not solve an owner's draw by calling it a paycheck. That confusion is one more reason the enrollment waits until the tax life is named out loud.

What to send

The enrollment page, with account numbers covered. The return type from last year. Whether anyone is already being paid. Those three facts tell us whether you are in a setup conversation or still in a classification conversation. They are not the same meeting.

Draws and wages are not the same word

An owner who takes money from a company living on a personal return is usually taking a draw. A payroll enrollment wants wages, withholding, and a calendar of deposits. Pasting an income-tax adjective into that enrollment can invent wages that were never wages, or it can hide a company that really does employ people. Neither result is fixed by finishing the screen faster. Stopping before the enrollment is finished is the help this page can give. Close the tab. Cover every account number before the enrollment screen comes to us. Say whether anyone is already being paid.

If the company does need a payday, the work we can start is setup. That means a provider you choose, a chart that can tell a draw from a wage, and the registrations the provider will ask you to sign. You run the provider after that. Deposits stay on the provider's calendar. We do not press the button on payday, and we do not become the employer of record by answering a question on a form. Reasonable pay for an owner comes up only when a corporate election is actually in force. Until that is true, calling a draw a paycheck does not make it one.

Two conversations get mixed in the same hour, and they should not. One conversation is the income-tax label, settled by the return you signed. The other is whether the company has employees. A yes on the first conversation does not answer the second. A no does not either. If the enrollment is the only form in your hand, say so in the first line of the note. We will not reteach the employment-tax pamphlet here. We will tell you to stop, and we will tell you whether the next meeting is a setup or still a classification reading. The enrollment can sit unfinished while you find the face of last year's return.