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Child Care Assistance Program Policy Manual Issued 07/2023 Self-employment income 6.6.5 income regardless of whether the individual decides to reinvest their income back into the corporation. An S-Corporation must file an annual information return (IRS Form 1120-S and related schedules) to report the income, deductions, gains, losses, etc. from its operations, but it does not pay income tax. Profits or losses are “passed through” to its shareholders. Each shareholder includes their share of the partnership's income or loss on his or her tax return (IRS Form 1040). All wages, draws, guaranteed payments, or compensation of officers paid to the business owner or a household member is considered earned income and entered in MEC2 as wages. Any other income from is considered self- employment income and entered in MEC2 as such. Limited Liability Company (LLC) A Limited Liability Company (LLC) is a hybrid business entity having certain characteristics of both a corporation and a partnership. When someone sets up an LLC, they separate their business and personal identities. If an LLC has only one owner, treat the LLC as a sole proprietor. All wages, draws, guaranteed payments, or compensation paid to a business owner or household member is considered earned income and entered into MEC2 as wages. Any other income is considered self-employment income and entered in MEC2 as such. Legal authority Minnesota Statutes 119B.09, subd. 4 Minnesota Statutes 119B.011, subd. 15 Minnesota Statutes 256P.05 Minnesota Rules 3400.0170, subps. 7 - 11