A friend of mine and I were talking about his father who’s a self-employed plumber and does all his tax reporting on his Schedule C and files jointly with his wife.
He describes his mother as a “stay at home mom”, she won’t benefit from social security when they retire expect to get half of husband’s benefit.
So we were thinking about what could be done for her to contribute to social security. So we talked about if the husband formed an LLC and making her also a “member” of the LLC, where she would get a K1 statement for herself as 50% ownership of the business and the husband would get a K1 statement for the other 50%. This way, she would have an income from the business. As we talked it turns out she does work, she does the company’s book keeping and makes appointments for him. So she is actually working, but doesn’t get a paycheck for this.
But would all this accounting/tax reporting effort actually matter for social security benefits? If their income (which he didn’t reveal) was split 50%, would this increase their benefit or not make any difference at all?
We didn’t discuss a retirement plan, I assume the husband does a self-employed IRA thing. But with an LLC they could form a 401(k) as employees of the company and be able to put more money away assuming their income supports it.