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TexLaw
TexLaw, Attorney
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Experience:  Lead trial/International commercial attorney licensed 11 yrs
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I am looking to start an outsourcing consulting company(LLC).

Resolved Question:

I am looking to start an outsourcing consulting company(LLC). Thinking of incorporating it in Nevada. The way majority of my business will work is my company will market resumes of future consultants and place them on projects(sort of recruiting agency) and will bid on contracts as well.I will have two active partners and I will be the passive partner as I am on H-1B visa.
Following are my questions:
1) How will I receive profit from the LLC?
2) How will taxes be reported to IRS(Lets say my LLC has 5 employees on W-2 in five different states)
3) Does a passive investor have to pay taxes on his share?

Thankyou for your information in advance!
Submitted: 1 year ago.
Category: Legal
Expert:  TexLaw replied 1 year ago.

Hi,

Thank you for your question.

An LLC is generallly treated as a partnership for tax purposes. That means that the profits are passed through to the member according to the member's percent interest in the LLC, and that member must pay individual taxes on that amount.

There are many different ways in which you may structure the LLC to distribute revenue. For example, assum the LLC receives $100,000.00 a year in revenue. The LLC then pays you a salary of $50,000.00 and pays $20,000 in other business expenses. That leaves $30,000.00 in profits, which would then be distributed to each member pursuant to his/her membership interest. The passive investor pays taxes on his share of this distribution. The LLC will report the salary payments to the IRS for all W-2 employees.

Please let me know if you have further questions regarding this matter or if you need me to go into further detail (if so, tell me what further information you are looking for). Please also remember to rate my answer positively so that I may be paid for my work on your question.

Thanks,

ZDN

Customer: replied 1 year ago.

Hi,


Thanks for your response. Once all W-2s are reported to the IRS how do I pay state taxes?Do I still have to pay state taxes for my LLC because the LLC would have already paid state taxes for individual employee via paycheck for the state that employee is working.


 


Thanks


PK.

Expert:  TexLaw replied 1 year ago.

The state taxes that are due for the LLC are only the franchise taxes and perhaps corporate income taxes depending on where you incorporate. Nevada is a wise choice because there are no corporate taxes or franchise taxes (however there are business personal property asset taxes that will still be due).

However, if you incorporate in another state, the taxes you might have to pay on the LLC level are different depending on where you decide to incorporate.

-ZDN

Customer: replied 1 year ago.

Hi,


Do I pay LLC taxes through my individual tax return or there is a separate form? Lets say I have 5 W-2 employees in different states do I have to pay LLC taxes to all those 5 states?I am currently on H-1B visa, so once I get my share say 30,000 do I also have to pay state taxes to 5 different states?

Expert:  TexLaw replied 1 year ago.

Are you saying that you want your LLC to operate in thos different states in addition to the state you want to incorporate in? If so, then you will have to register the LLC in those different states and the LLC will have to pay the taxes that are due as a foreign corporation doing business in each state. Each state has different tax treatment for foreign LLCs doing business. For instance, if your Nevada LLC wants to do busines in Texas, it must register with the Texas Secretary of State and pay Texas franchise taxes.

The 30,000 that comes to you individually is only taxed on you individually, the LLC pays the state taxes that it must pay prior to making the distribution to the members. Then it pays out any salaries due to its employees. Then, if there is any money left, the members take that as a distribution and each member shall pay personal income tax on it for the state where they live.

Customer: replied 1 year ago.

Yes. Also how does LLC pay state taxes, is there a separate form? Also does the profit get distributed evenly based on shares distribution or it can be distributed however the partners decide?. How do I get paid from LLC does the main owner simply write me a check and also how are distributions paid?


 


Thankyou!

Expert:  TexLaw replied 1 year ago.

The LLC will have to use different forms to pay the taxes due in each state in which it is operating.

The profits are distributed however the members agree to have them distributed. This needs to be in an "Operating Agreement" which states how the profits are going to be distributed.

If you are an employee of the LLC, then you should be given a paycheck from the LLC for your salary.

Distributions of profit should also be paid from the LLC's bank account by check to the members.

TexLaw, Attorney
Category: Legal
Satisfied Customers: 4265
Experience: Lead trial/International commercial attorney licensed 11 yrs
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Lead trial/International commercial attorney licensed 11 yrs