On Tuesday, I discussed ways to calculate income for a sole proprietorship. Today, I will discuss how you calculate your personal income if you are a member of a LLC. This information is important if you are planning to purchase a new home, as that income is what will ultimately qualify you for the house.

If you are a member of a LLC, you need to determine how you pay yourself: do you pay yourself a W-2 salary and take any leftover profits as a Schedule K1 income, or do you take all of the income as Schedule K1. You also need to consider how many members there are in the LLC and how ownership is divided; this will tell you what your percentage of ownership is in the business and thus your percentage of profits.

If you pay yourself a W-2 salary, you will need to show a copy of the W-2 to verify that income. Any additional income which you take will be through a Schedule K1, and will be documented with a copy of the tax return.

Calculating the income which you take as a Schedule K1 for a LLC is virtually the same as calculating Schedule C income for a Sole Proprietorship, and can be found in my last blog post. The primary difference is the business income will need to be divided by the members.

If you are a member of a LLC and are curious about how much house you will be able to qualify for, please contact me. If you have anything to add about how to calculate income for a LLC, please leave a comment.