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MShore Law
MShore Law, Attorney
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Experience:  Drafted Negotiated and/or Reviewed Thousands of Commercial Agreements
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If I am a member of a LLC 1) can i be paid a salary, 2) are

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If I am a member of a LLC 1) can i be paid a salary, 2) are taxes withheld from such salary and 3) do I file my taxes as self-employed?
Submitted: 3 years ago via Nolo Press.
Category: Business Law
Expert:  MShore Law replied 3 years ago.
Thank you for the post, I am happy to assist you by answering your questions. Am I correct to assume this is not a single member LLC?
Customer: replied 3 years ago.
Yes, it is multiple members. I only own 1%. I was an employee prior to being given the 1% stake. I'm concerned that since my becoming a member, nothing was done. I'm paying taxes the same as before, same withholding, etc.
Expert:  MShore Law replied 3 years ago.
Thank you, XXXXX XXXXX 1% entitle you to profit sharing in addition to your regular salary?
Customer: replied 3 years ago.
Yes it does. Also, we pay taxes as a partnership, not corporation. I was given a document by my CFO stating I had to pay $2500 in taxes at the end of the year on "retained earnings" at the end of the tax year, as well, which corresponded to about 1% of the profit held.
Expert:  MShore Law replied 3 years ago.
Thank you, XXXXX XXXXX correct. LLC members are considered self-employed individuals (not employees). Each member must pay self-employment taxes based on his or her share of the income of the LLC, in your case that would appear to be whatever sum 1% ownership entitles you to retain. Self-employment tax is included in each member's Form 1040 for federal taxes, calculated using Schedule SE. The total self-employment tax liability is then included on line 57 of Form 1040. Please let me know if you have any follow up questions.
Customer: replied 3 years ago.
I understand that any distribution of profit to me is taxable in that manner, but my question is on a salary. My understanding is that as a MEMBER, I am not supposed to be a W-2 Employee. If I work for the LLC, and receive compensation for that work, I am supposed to be paid via "guaranteed payment", not salary. That income is exempt from withholding and I have to pay income tax on it as self-employed. My CFO is saying this is NOT true and that it only applies to "managing partners", and I am a "limited" partner. I see no provisions in the IRS publications about that. It ways if I am a member and i provide services to the LLC I can be compensated via "guaranteed payment"....
Expert:  MShore Law replied 3 years ago.
That is correct, you are not a w-2. I concur with your assessment. I find no support for the notion that limited partners are to be treated as W-2s.
MShore Law, Attorney
Category: Business Law
Satisfied Customers: 25285
Experience: Drafted Negotiated and/or Reviewed Thousands of Commercial Agreements
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