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DanielleCPA, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 794
Experience:  Years of Experience in Business & Personal Taxes
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Partner A, B, and C own LLC #1. LLC #1 is a 50% owner in LLC

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Partner A, B, and C own LLC #1. LLC #1 is a 50% owner in LLC #2. Partner A from LLC #1 runs the day to day business of LLC #2. Is this partner the considered an employee of LLC #2 and able to be on payroll, or is he considered a partner through his ownership of LLC #1 in LLC #2 and thus required to take guaranteed payments instead?

DanielleCPA :

Welcome and thanks for your question!

DanielleCPA :

Is the partner's only "ownership" of LLC #2 through his actual ownership of LLC #1?

Customer: A separate LLC of which he has no ownership in is the other 50% owner of LLC #2. Does that answer your question?
Customer: He and the other two members of LLC #1 make most business decisions of LLC #2 though. So they in effect are owners but it is structured through the LLC #1 ownership.... If that makes sense...
Customer: A little more info....LLC #1 just holds a couple assets. LLC #2 is a manufacturer that uses those assets to build boats (it is boat molds that LLC #1 owns).
DanielleCPA :

Yes, that answers my question. Thanks for the additional info.

DanielleCPA :

Because LLC #2 is a separate entity and Partner A is not a member in that LLC, he can be treated as an employee and take payroll from LLC #2 rather than guaranteed payments.

DanielleCPA :

If compensation is received through LLC #1, that would obviously need to be considered as guaranteed payments.

Customer: Yay! That makes my life so much easier (it is a new company and their first payroll is tomorrow). I could see the answer going either way... And am just glad to get some reassurance that my gut was right. Yeah, there really aren't employees of LLC #1 as it just holds assets. Thank you
DanielleCPA :

You're welcome. Glad I could help!

Customer: Have a good night. Am going to rate as excellent service. :-)
Customer: Unless you've got more gems of wisdom for me...
DanielleCPA :

I appreciate it. Enjoy the rest of your evening.

Customer: Will do. You too. Happy Easter!
DanielleCPA :

Same to you! If you end up having any follow-up questions, please feel free to come back and I will gladly help.

Customer: Thanks. Appreciate it.
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