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My MD LLC is a sole proprietor and I want to give my wife

49% membership. Do I...
my MD LLC is a sole proprietor and I want to give my wife 49% membership. Do I issue her a K1?
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Answered in 9 minutes by:
4/19/2017
Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 30,150
Experience: Taxes, Immigration, Labor Relations
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Transactions between spouses are not taxable.

Thus - when you transfer 49% interest in the LLC to your spouse - that is not taxable transaction.

After that - your LLC will be two member LLC and will be treated as a partnership for tax purposes.

.

A partnership is the relationship existing between two or more persons/entities who join to carry on a trade or business.

Each person/entity contributes money, property, labor or skill, and expects to share in the profits and losses of the business.

The partnership files its own tax return form 1065 - - reporting income and deductions - thus you would need to have a separated tax ID for the partnership.

But the partnership doesn t pay income tax.

The partnership should issue schedules K-1 to each partner reporting pro-rata share of net taxable income (or loss) -http://www.irs.gov/pub/irs-pdf/f1065sk1.pdf

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Lev
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Customer reply replied 7 months ago
LLC membership is private at Maryland, I am the register agent. Sounds like we can continue with the current EIN and LLC status with Maryland?
So we only need to do K-1 and file fed tax as partnership on 1065 and pass through our individual income to ourselves per our K-1s?
Customer reply replied 7 months ago
goals: #1 phase my share of profit from 100% down to 51% trying to get under $16k/year and therefore draw my social security without penalty. I am 63. Not an issue when I get to full retirement age 66 in three years.
#2 spouse is 53 and can take on larger share and also permit her to contribute to company SEP IRA (Keogh profit share)
No other employees, only a few 1099s support our management consulting business.
Phone call session started

I will be able to discuss your issue over the phone in about 2 hour.

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Customer reply replied 7 months ago
I will be waiting for your call thanks.

In continue our conversation ...

In the year you reach full retirement age, the SSA will deduct $1 in benefits for every $3 you earn above a different limit.

In 2017, the limit on your earnings is $44,880 but they only count earnings before the month you reach your full retirement age.

Beginning with the month you reach full retirement age, your earnings no longer reduce your benefits, no matter how much you earn.

.

Another issue - if you retire before your FRA - your benefits will be PERMANENTLY reduced by .52% for each month before age 66.

I woudl keep that option if you will loose your earning and need that income too cover your living expenses.

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