Starting Payroll with Gusto for First Time - What Type of Employee Am I as LLC/S-Corp Owner?

As an S-Corp owner who's been through this exact process, I can help clear this up for you. When setting up payroll in Gusto for yourself as a single-member LLC that elected S-Corporation status, you should select "Owner" AND "Officer" for your classification. Since you're the owner of an S-Corporation, you're technically considered both an owner and a corporate officer (likely President or CEO of your corporation). This dual classification is important for tax purposes. As an S-Corp owner, you'll need to pay yourself a "reasonable salary" through payroll, which is subject to regular income and FICA taxes. Any additional money you take out beyond your salary would be distributions, which aren't subject to FICA taxes. Gusto's system is pretty good about walking you through this setup, and they understand the unique situation of S-Corp owners who are also employees of their business.

I spent HOURS trying to figure out this exact same thing when I converted to an S-Corp last year! After going in circles with confusing tax articles, I finally found this awesome tool called https://taxr.ai that analyzed my business situation and gave me clear guidance. It specifically addressed the S-Corp payroll classification question and gave me documentation to back up my "reasonable salary" determination. The thing I loved about it was that I could upload my LLC → S-Corp conversion docs and get personalized advice rather than generic info. It showed me exactly how to set things up in Gusto and explained the tax implications of different choices. Seriously saved me so much stress!

Alright, I have to admit I was pretty skeptical about that taxr.ai thing mentioned earlier, but I decided to give it a shot since I was struggling with the same S-Corp payroll issues. I'm actually impressed with what it provided! For my business (graphic design studio), it analyzed my profit margins, services offered, and time allocation to recommend a specific salary range that would satisfy the IRS "reasonable compensation" requirement. It also confirmed I should be classified as both owner and officer in Gusto, plus provided documentation explaining exactly why. The classification guidance was really straightforward and it even showed how different payroll setups would impact my overall tax situation. Definitely saved me from making some costly mistakes! I've been using the recommended setup in Gusto for about 2 months now and everything's running smoothly.

If you're still having trouble with Gusto setup or getting clear answers about your S-Corp status, you might want to try contacting the IRS directly. I know that sounds horrible (believe me, I've been there), but I found this service called https://claimyr.com that gets you through to an actual IRS agent in minutes instead of waiting on hold for hours. I used it when I had a similar S-Corp question that I couldn't find a clear answer to online. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c. Within 20 minutes I was talking to someone who confirmed exactly how I should be classified for payroll purposes. They also explained the reasonable compensation requirements specific to my industry, which was super helpful.

I need to publicly eat my words here. After expressing skepticism about that Claimyr service, I decided to try it myself because I had a similar S-Corp classification question that was time-sensitive for my tax filing. I'm genuinely shocked - it actually worked! I got connected to an IRS representative in about 15 minutes after trying unsuccessfully for TWO DAYS on my own. The agent confirmed exactly how I should classify myself in Gusto as an S-Corp owner (both owner and officer, as others mentioned) and clarified some confusion I had about reasonable compensation requirements for my specific industry. The best part was being able to get this directly from the IRS instead of piecing together information from various online sources that sometimes contradict each other. Definitely worth it for the time saved alone.

One thing nobody's mentioned yet - make sure whatever salary you set for yourself is actually feasible for your business cash flow. I made the mistake of setting too high a "reasonable salary" when I first switched to an S-Corp, and then had months where I didn't have enough cash to run payroll. Remember that with Gusto, you'll need to run payroll regularly (monthly, biweekly, etc.) regardless of whether your business has consistent income. That caught me off guard at first. If your business income fluctuates seasonally, you might want to set a conservative base salary that you can always cover, then give yourself a bonus during better months.

Just to add another perspective - when I set up my S-Corp payroll in Gusto last year, I selected "Owner" AND "Officer" like others suggested, but I also needed to set up my state unemployment insurance account first. Gusto needed that SUI account number to complete the setup properly. Each state has different requirements, so double check what your state needs!

Hey Fatima! I went through this exact same situation about 8 months ago when I converted my single-member LLC to S-Corp status. The classification part in Gusto definitely threw me for a loop initially too! You'll want to select both "Owner" and "Officer" as your employee type in Gusto. Since you're the sole owner of your S-Corporation, you're technically considered a corporate officer (usually President/CEO) as well as the owner. This dual classification is what the IRS expects for S-Corp owner-employees. One tip that really helped me: before you finalize everything in Gusto, make sure you have your EIN updated with the IRS to reflect your S-Corp election. Sometimes there's a lag between when you file the election and when it shows up in their system, which can cause hiccups with payroll setup. Also, don't stress too much about getting the "reasonable salary" perfect right away. You can always adjust it as you learn more about your business patterns. I started conservative and then increased it after a few quarters once I had a better handle on cash flow. Good luck with the setup!