Payroll for LLC's

Who can take payroll in an LLC?

The answer to this question depends on how the LLC is taxed.

• If the LLC is taxed as a partnership, then the members of the LLC are not considered employees and cannot take a payroll. Instead, they will report their share of the profits or losses on their individual tax returns.
• If the LLC is taxed as a corporation, then the members of the LLC who are actively involved in the management of the business can be considered employees and can take a payroll. The amount of the payroll will be determined by the member's job duties and responsibilities.

What about guaranteed payments?

Guaranteed payments are payments that an LLC makes to a member whether or not the LLC makes a profit. These payments are made regardless of the LLC's profitability and are considered to be a business expense. Guaranteed payments are typically made to members who provide services to the LLC, such as managing the business or providing specialized expertise.

Guaranteed payments are different from distributions, which are payments that are made to members based on their ownership interest in the LLC. Distributions are only made when the LLC has profits, and they are not considered to be a business expense.

Guaranteed payments are taxed differently than distributions. Guaranteed payments are considered to be self-employment income for the member who receives them, and they are subject to self-employment taxes. Distributions, on the other hand, are not considered to be self-employment income, and they are not subject to self-employment taxes.

Guaranteed payments can be a valuable tool for LLCs. They can be used to ensure that members who provide services to the LLC are compensated, even if the LLC does not make a profit. Guaranteed payments can also be used to attract and retain talented members.

Member managed vs Manager managed LLC, what’s the difference?

The main difference between a member-managed LLC and a manager-managed LLC is who is responsible for managing the day-to-day operations of the business.

In a member-managed LLC, all of the members are responsible for managing the business. This means that all of the members have the authority to make decisions about the business, such as hiring and firing employees, entering into contracts, and opening and closing bank accounts.

In a manager-managed LLC, one or more members are designated as managers. The managers are responsible for making all of the day-to-day decisions about the business. The other members of the LLC are not involved in the management of the business, but they still have the right to vote on major issues, such as dissolving the LLC or changing the management structure.

There are some advantages and disadvantages to both member-managed and manager-managed LLCs.

Advantages of member-managed LLCs

• Members have more control over the business.
• Members can be more involved in the day-to-day operations of the business.
• Member-managed LLCs are generally easier to set up and maintain.

Disadvantages of member-managed LLCs

• Members may not have the time or expertise to manage the business.
• Disagreements between members can lead to conflict.
• Member-managed LLCs may be more difficult to sell.