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Discussion:"Limited Entrepreneur" and Benefits?

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Discussion Forum Index --> Advanced Tax Questions --> "Limited Entrepreneur" and Benefits?


Discussion Forum Index --> Tax Questions --> "Limited Entrepreneur" and Benefits?

Covance (talk|edits) said:

30 April 2011
Can a LLC member or S corp shareholder classified as a "limited entrepreneur" for tax purposes, and meeting all relevant tests to be classified as such, receive benefits from the LLC or S corp such as paid health insurance premium, and use of company automobile when related to work performed in the "limited entrepreneur" capacity?

Thank you in advance for any insight!

Tpasco (talk|edits) said:

30 April 2011
The two are self-evidently mutually exclusive.

Covance (talk|edits) said:

1 May 2011
So, anyone who does not receive income subject to SE tax cannot receive benefits such as health insurance paid for the by business entity? I am confused because I have seen discussions regarding the treatment of health insurance write-offs when it comes to greater than 2% S-corporation shareholders, and the difference between taking health insurance in the name of the business entity vs. the individual.

In all these discussions, is it always assumed that the shareholders/members being discussed are actively/materially participating in operations?

Thanks again!

Laticiaw (talk|edits) said:

2 May 2011
But an Entreprenuer by the definition is not matierally participating. They are providing the money for the business...not doing anything with the daily operations of the business. They are considered passive. If you start giving them benefits it can quickly eliminate that position and probably make them non-passive and then subject to Social Security for all income from that compa y. Also you have to look at the shareholder in an S corporation and a Parter in a Partnership as two totally different animals. What will work for one may not work for the other...which is why you should always obtain the advise of an attorney prior to forming a company...and talk to a tax professional to get the tax advantages and disadvantages of each entity.

Tpasco (talk|edits) said:

2 May 2011
"work performed in the "limited entrepreneur" capacity" - nonsequiteur. No "work" should be performed in the "limited entrepreneur" capacity.

LH2004 (talk|edits) said:

May 2, 2011
You think doing any work at all means that you "actively participate in the management?"

Covance (talk|edits) said:

3 May 2011
I am confused by the same concept LH2004 brings up.

A limited entrepreneur from time to time is allowed to provide strategic guidance to their company as long as they are not involved in daily operations or violating any of the other participation rules as far as I can tell, so why can the company not pay for something like their health care insurance?

Covance (talk|edits) said:

3 May 2011
Are there rules saying no that are more clear cut for limited partners/investors that are being applied to limited entrepreneurs?

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