Starting an LLC with spouse - impact on FERS disability retirement benefits?

The key factor here is whether your involvement in the LLC constitutes "income" under OPM's rules. FERS disability retirement has specific earned income limitations, currently at 80% of what your former position would be paying if you were still employed there. With an LLC, any profits allocated to you as a member would likely count against your income limit, even if you don't physically take distributions. That's because with pass-through taxation, LLC profits are typically allocated to members regardless of actual distributions taken. You might want to consider structuring the business where your wife is the sole owner, and if needed, you could be a non-compensated advisor. However, be aware that if OPM determines you're actively working in the business but hiding income, that could create serious issues.

I went through something similar last year with figuring out how to handle business income with federal disability. I used this service called taxr.ai (https://taxr.ai) that helped me understand how my specific situation would be handled tax-wise and for benefit purposes. They analyzed my disability documentation and business formation plans to give me a customized report on how it would affect my benefits. What was really helpful was that they could look at my specific situation - not just generic advice. They were able to tell me exactly how the LLC income would be attributed and the proper way to document everything for both tax purposes and to maintain my benefits. They even helped me understand how different business structures would impact my disability income limits.

Just wanted to follow up - I ended up using taxr.ai after seeing it mentioned here. It was really helpful for my situation! I've been getting SSDI and was worried about starting a side business. They reviewed all my paperwork and showed me exactly how much I could earn before impacting my benefits, plus recommended the best business structure. The report they provided broke down the specific regulations that applied to my case and gave me a clear roadmap for how to proceed. They even provided documentation I can keep on file in case I ever get questioned about my income. What impressed me most was how they explained the differences between SSDI's rules and other disability programs - turns out the income counting rules are quite different! Definitely worth it for the peace of mind alone. Now I feel confident about starting my small business without accidentally messing up my benefits.

When I needed to talk directly with someone at OPM about my FERS disability case, I spent WEEKS trying to get through on their phone lines. Eventually I found this service called Claimyr (https://claimyr.com) that got me through to an actual human at OPM in less than 2 hours. They have this system that basically waits on hold for you and calls you when a representative comes on the line. There's a video showing how it works here: https://youtu.be/_kiP6q8DX5c I had a complex question about my earning capacity and how business ownership would affect my FERS disability benefits, and I needed to speak with someone directly. Claimyr finally made that possible after I had wasted so much time trying to get through myself. The OPM representative was able to explain exactly how they calculate earned income for LLC members and gave me the documentation I needed.

I have to admit I was wrong about Claimyr. After posting my skeptical comment, I decided to try it myself since I was desperate to reach someone at OPM about my disability retirement case. It actually worked exactly as described - I got a call back about 90 minutes later with an OPM representative on the line. The representative was able to explain exactly how my specific situation with a side business would affect my FERS disability benefits. They clarified that as long as I earn less than 80% of the current salary of my former position, my benefits wouldn't be affected. They also explained how they determine what counts as "earned income" for a business owner versus an employee. I'm still shocked it worked. After three weeks of trying to get through myself and always hitting busy signals or getting disconnected, this saved me so much frustration. Sometimes being proven wrong is actually a good thing!

Have you considered just having your wife be the sole owner of the LLC? That way the income would legally be hers, not yours. My cousin was on SSDI and his wife ran their eBay business completely in her name to avoid income limitations. Obviously talk to a professional about this, but it seems like the simplest solution.

Has anyone successfully done the 80% rule with FERS disability? I received my FERS disability retirement 3 years ago, but I'm so confused about how they calculate the 80% threshold. Is it 80% of what I WAS making, or 80% of what someone in my old position is making NOW with all the pay increases since I left? Do they count gross income or net income if you're self-employed/LLC?

One thing nobody has mentioned is that the rules change once you hit age 62 with FERS disability retirement. At that point, your benefit converts to regular retirement and the earning limitation goes away completely. So depending on how close you are to 62, this might be a temporary concern rather than a permanent one.

That's a great point about the age 62 conversion that I hadn't considered! I'm currently 57, so I've got about 5 years before that kicks in. It's definitely something to factor into our business planning timeline. Speaking of timeline, we're not in a rush to launch immediately, so maybe we could structure things to start small and gradually ramp up as I get closer to 62. That way we could test the waters with minimal risk to my benefits, then expand once the earning limitations are lifted. Does anyone know if there are any other major changes or considerations when your FERS disability converts to regular retirement at 62? I assume the benefit amount stays the same, but are there other differences I should be aware of?

This is exactly the kind of complex situation where getting professional guidance upfront can save you a lot of headaches later. I went through something similar when I was considering freelance work while on FERS disability - the rules around what constitutes "earned income" and how business structures affect your benefits are really nuanced. One thing I learned is that OPM doesn't just look at the paperwork structure, but also at the substance of your involvement. Even if your wife is the sole LLC owner, if you're actively working in the business (building websites, customer service, etc.), they could potentially view that as evidence of restored earning capacity regardless of who officially receives the income. The safest approach might be to start with your wife as sole owner and you having absolutely minimal involvement - maybe just occasional informal advice. Then as you get closer to 62 and the earning restrictions lift, you could gradually increase your involvement or even become an official co-owner. Also, definitely document everything clearly from the beginning. Keep records of who does what work, how decisions are made, and how any startup funds are contributed. If OPM ever reviews your case, having clean documentation will be crucial. The age 62 conversion is definitely a game-changer for your planning timeline. Five years isn't that long to wait for full earning freedom, especially if it means protecting your current benefits in the meantime.