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(b) Limited Liability Companies can elect to be taxed as a Sole Proprietor, Partnership, Corporation, or an S-Corporation, providing much flexibility. LLC’s can lose their tax advantage without the partnership structure. Treat income based on the Limited Liability Company’s election.

(c) Limited Liability Companies are organized with a document called the “Article of Organization” or the “Rules of Organization.” Additionally, it is common to have an operating agreement privately specified by the members. See website above for verifying information about an LLC.

E. Verification of Self-Employment Income/Operational Expenses

1. Attempt to verify self-employment income in the following order:

a. Use the federal income tax return from the most recent tax year or the most recent year’s quarterly income tax statements if available. Do not use tax return or quarterly tax statements unless at least some of the months included on the tax return or quarterly statements are included in the base period. This is true even if the a/b states there have been no change in his average earnings. If some of the months from the base period are represented in the tax document, you may project income from the tax documents for the entire base period if the a/b states there have been no change in the business earnings. Use another source for the months in the base period in which there has been a change in earnings.

Example: Mr. Roberts applies for Medicaid on 4/20/07. He has been self- employed as a car mechanic for the past five years. The base period for his self-employment income is 04/06-03/07. He provides his 2006 tax return documents to verify his income and states that there have been no changes in his income or expenses. The tax return from 2006 indicates yearly gross earnings of $36,000. The monthly average gross income for 04/06-03/07 is $3,000. His total allowable operational expenses from 2006 which were verified by receipts provided, total $5,100. Divide $5,100 (total yearly operational expenses) by 12 months. The average monthly operational expense is $450.00. Subtract the average monthly operational expenses from the average monthly gross income. $3,000 minus $450 equals $2,550.00. $2,550.00 is the monthly adjusted gross income to budget for the entire ongoing certification period.