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  1. #1
    Join Date
    Dec 2009
    Posts
    1

    Default Tax Rules for Payments from LLC

    Hi experts,

    I'm considering starting an LLC, but I'm not clear about the tax/document/filing issues for those people that the LLC pays.

    I'd like to understand things better, so here are the various roles a person might have related to an LLC.

    ***the official LLC "manager"
    ...in a solo LLC managed by the only person in the LLC
    ...in an LLC with a official "manager" plus official "members"

    ***an official "member" of LLC ( i.e. non-manager )

    ***a non-member, i.e. someone who provides a service to the LLC

    So .....in the roles mentioned above....
    Who gets a 1099 for $600+ income received from the LLC in a given year?
    And who ( if anyone ) files a Sched C along with personal taxes to record annual income/expenses for the LLC itself?
    Are any of the roles noted above required to demonstrate payment from the LLC with a *different* tax form ( i.e not 1099, not Sched C...? ) If so, which role and what form?

    Thanks for your help in clarifying who gets what and who files what in the LLC world...!



    And now for the special bonus question
    --------------------------------------

    I have heard about potential tax advantages of an S-Corp over an LLC ( i.e. possible reduction in employment taxes for those being paid ) ... but in my case, the LLC would have low annual revenue and will only be paying $500-$5,000 per year to manager and/or members ( if any ). Do the employment tax advantges of an S-Corp disappear when the amount paid to manager/members per year is less than a typical annual salary?

    Thanks again for your help with either of these issues....very much appreciated!!

  2. #2
    Join Date
    Jun 2009
    Location
    California
    Posts
    666

    Default Re: Tax Rules for Payments from LLC

    Answering your questions completely would take a very long response because of a number of qualifications, "if" conditions, and related factors that would apply. I recommend that you do some reading on the subject. Either get a good book or do a web search on "llc vs S corporation" or both. Or, for the tax issues, pay an accountant to have a sit-down with you and discuss your specific situation.

    For example, your list of roles is incomplete but does not provide enough information to determine tax status of the roles that you list. Maybe someone else can provide more general information to you, but I'd be concerned about me making assumptions that might cause me to give you bad information with the question as stated.

  3. #3
    Join Date
    Jul 2007
    Location
    Florida
    Posts
    2,344

    Default Re: Tax Rules for Payments from LLC

    A 1099-MISC is not for owners, managers, members, or employees of an LLC (or a corporation for that matter). Anyone that the LLC pays $600 or more to either for rent, royalties, or services rendered should receive a 1099-MISC unless they are a corporation. Employees receive a W-2. Depending on whether the LLC is treated as a disregarded entity for tax purposes, or it elects to be treated as a corporation for tax purposes, there are different rules for how owner/partner/member income is treated. They could receive a W-2 if taxed as a corporation, receive a K-1 if taxed as a partnership or S corporation, or not receive any income statment if a single owner LLC treated as a disregarded entity.

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