I am a freelance software
engineer performing services for clients in California
. I intend to establish an LLC
. My plans and assumptions are below. I'm looking for a confirmation or rebuttal of these assumptions:
I plan to set up the LLC with my wife and I as the only members.
It would be taxed as a partnership
(the default) and manager-managed (as opposed to member-managed) by me alone. I would be performing all work. My wife would perform no work, have no managerial capacity, and not be able to sign for anything (a passive LLC member).
The LLC would pay me each month for my services with a reasonable Guaranteed Payment.
At the end of the year, the remaining profit would be divided between us
according to our LLC percentage share (let's say this is 60/40 in my favor.)
* In California — a community-property state
— I understand that for husband-wife LLCs, the LLC's assets
are not protected from personal
creditors, but our personal assets would be protected from LLC creditors. Is that the case? (The latter is the important direction for us.)
* As an active LLC member, I would pay Self Employment Tax
on both my Guaranteed Payments and end-of-year profit distribution
. But, as a passive member, my wife would not pay Self Employment Tax on her profit distribution. (I know this is the case for normal passive members, but what about husband-wife LLCs? If true, what would stop us from giving her 90% of end-of-year profits, for example.)
Thanks in advance.