I have a single member LLC. All income from it will be passive income such as interest, dividends, capital gain or rental income, none of which is subject to self employment (SE) tax. Obviously the LLC will have expenses too. If I use the default tax status, its treated as sole proprietor and income is reported on Schedule C.
1. Is this income then subject to SE Tax because its on Schedule C or is it reported elsewhere? If elsewhere, is that income still offset by the expenses?
2. If it does trigger SE Tax, would a status election of S-Corp solve this problem if it is subject to SE tax and what other issues would that raise?