Discussion:LLC Owner Wages
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Discussion Forum Index --> Tax Questions --> LLC Owner Wages
| 13 January 2006 | |
| If an LLC is formed and elects to be treated as a corporation, can the owners then take a W-2 wage or must they still take a draw as their pay? | |
| 13 January 2006 | |
| Yes, the draws should be reported as payroll since the LLC is a corporation for all tax purposes. | |
| 13 January 2006 | |
| Thank you for the quick response. So just to clarify, even though they are owners I can still pay them via payroll and withhold FICA and medicare, etc.? | |
| 13 January 2006 | |
| You are correct - since they are now considered employees of the corporation (and not partners/members in a partnership LLC) they would be paid as an employee with all proper payroll tax withholdings. You must also prep a corproate return (1120/1120S versus 1065. | |
| 14 January 2006 | |
| Actually, the owner's of an LLC should receive 2 forms of pay. They should be compensated a fair amount for the services they provide to the LLC - this should be paid on a W-2 and be subject to normal payroll taxes. If there is a profit in excess of this, it would flow through to the owners and be subject to income tax only. | |
| 24 June 2007 | |
| Hello, I have a similiar question, and any input would be graetly appreciated.I recently started a small business under a multi member LLC where the owners are also employees. Do we get paid as employee on payroll or take a draw.
please help thanks kim | |
| June 24, 2007 | |
| Answered on your other thread, Kim. The difference here is that the LLC elected to be taxed as a corp. | |
| 24 June 2007 | |
| someone checked the "stupid" box
Ensen, that would be called a Dividend, and it isn't very tax efficient. | |
| 24 June 2007 | |
| Kevin, do you consider electing S corp treatment to be not tax efficient as well? -- Larry Hess, CPA | Albuquerque, NM | Talk to me | |
| 24 June 2007 | |
| no I think that is tax efficient, but JR1 thinks if you want to be taxed as an S, then set up an S, don't check the "stupid" box | |
| 24 June 2007 | |
| It can cost less to set up and maintain an LLC than a corporation. In New Mexico, for example, after the initial report is filed with - and fee paid to - the state's corporation oversight authority, an LLC is never required to file another report. There also may be state law advantages of an LLC over a corp. -- Larry Hess, CPA | Albuquerque, NM | Talk to me | |
| 24 June 2007 | |
| In NYS an LLC is subject to an annual fee/member with a specified mimimum, so it can be costly if you don't have enough members to cover the fee.
The LLC can elect to be taxed as a corp or partnership. No p/r with the partnership. P/r with the corp. If the LLC is taxed as a c corp, dividends are taxable. If taxed as an s corp, distributions are not taxed. | |
| June 24, 2007 | |
| All I've said, and it's backed up by tax attorneys, is that are issues, legally, over the structure of using the stupid box. While TAXED as a corp, it's still an LLC, and there are and will be conflicts, then, in the underlying law when those laws conflict. There are other threads on this. | |
| 25 June 2007 | |
| do a yellow box search for "stupid box", you're sure to find the other threads. Then click on 500 views. | |
| 17 November 2007 | |
| Riley2
In response to Jallio then a SMLLC onw owner/member not taxed as a corp would be paid via a draw, correct? | |
TheTinCook (talk|edits) said: | 18 November 2007 |
| Yes | |
| 18 November 2007 | |
| But, what do you do if you recently picked up a new single member LLC and the prior accountant has the owner on the payroll? A. Adjust all prior years refilling quarterly and annual payroll returns and personal income tax returns. B. Adjust and amend current year payroll reports or C. Correct as of January 1st 2008? | |
TheTinCook (talk|edits) said: | 18 November 2007 |
| D) First check to see if the LLC elected C-Corp or S-Corp status. If not, get the member off payroll ASAP, request a refund on the Q4 941. If you take a payroll tax refund for Q1, Q2, and Q3 your client will have to play catch up with estimated tax. This is a big issue when retirement plans, domestic production activities deduction, worker's comp, state disability insurance are involved. Amend all open year income tax returns.
I get the feeling from some of the other members on the board, that they only correct on a go-forward basis and don't correct prior year returns if the tax effect is minimal. For what it's worth, currently there is no such thing as an amended payroll return. There is only the 941-C which is attached the current quarter 941. | |
Death&Taxes (talk|edits) said: | 18 November 2007 |
| We have a rather incredible research base here at Taxalmanac filled with the posing, blustering and sometimes correct opinions of our members. One good thread for the all the answers needed is Discussion: Single Member LLC owner draws/payroll. Will the next person adding a similar question to this thread, please read that first, and then type LLC Payroll or LLC Issues into the search block? | |
| 18 November 2007 | |
| Tin Cook, I initially found out about this problem on Friday. I also saw the other posting and it looks like those individuals who had been audited the IRS agent did not correct for the owner taking wages instead of draws. I was thinking of leaving 2007 as is and changing for 2008. What are your thoughts? Also, has anyone been involved in an audit and had the IRS agent correct for the owner taking wages instead of draws? | |
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