Sole Shareholder

Sole Shareholder – So, you formed a corporation from your current business, or you started off as a corporation, and now you need to draw a paycheck for yourself. If you were previously a sole proprietor or a partnership, you are used to taking an ‘Owners Draw’ from your business that was not payroll. But now that your business is a corporation, you can no longer take an ‘Owner’s Draw’, but instead need to be on the payroll and receive a paycheck.

You now will have payroll taxes deducted from your pay check, but if you are a sole shareholder of a corporation or you and your spouse are the only shareholders, then you may exclude yourself (and spouse) from State Disability insurance (S.D.I.).

This can save you up to $.90 per $100 in wages, per shareholder (for you and your spouse) per year.

State Disability Insurance for 2024 is 0.9% of all taxable wages per year, no limit. By electing to exclude yourself and your spouse, you can eliminate this 0.9% from your personal corporate wages. Here is the math:

$100,000 Taxable Wage x 0.9% = $900.00 per shareholder, times two shareholders = $1,800.00 total.

$200,000 Taxable Wage x 0.9% = $1,800.00 per shareholder, times two shareholders = $3,600.00 total.

To make this election, complete for DE 459 Sole Shareholder/Corporate Officer Exclusion Statement and submit it to the EDD. Here is a link to the form http://www.edd.ca.gov/pdf_pub_ctr/de459.pdf and the mailing address and contact numbers are:

EMPLOYMENT DEVELOPMENT DEPARTMENT

TAXPAYER ASSISTANCE CENTER, ATTN: SPECIALIZED COVERAGE DESK

P.O. Box 2068

Rancho Cordova, CA 95741-2068

Phone: (916) 654-6288

Fax: (916) 319-1179

Disability Insurance (DI) Statewide Toll-Free Number 1-800-480-3287

The exclusion becomes effective in the current calendar quarter and remains in effect for not less than two calendar years.

The sole shareholder wages must be reported on a separate Quarterly Wage and Withholding

Report (DE 9). Write “Sole Shareholder” across the top of the DE 9.

Question: ‘Without SDI, what options do I have for disability coverage or Family Medical Leave Act?’

Answer: Aflac, MetLife and Mutual of Omaha are good alternatives, and they have coverage for areas that aren’t covered by SDI. Do some research and find out what is best for your situation.

If you have any questions about form DE 459 Sole Shareholder/Corporate Officer Exclusion Statement, or State Disability Insurance (S.D.I.) you can contact us at:

Cloud Payroll
7231 Boulder Ave. #526
Highland, CA 92346
Ph 909-657-6019
www.CloudPayrollPros.com