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Accounting, Payroll & Pension Issues/Multi-owner LLCs and Salaries
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Question
QUESTION: When you have multiple owners in an LLC and one or more of the owners actually work in the business, how do you pay a salary to the ones who work while keeping it separate from any profits shared by all of the the owners? Also, for the owner/workers, is the salary taxed upon receipt and then any profits taxed as well?
ANSWER: You pay the working owner a salary in wages taxed same as other employees with a W-2 form at the end of the year.
You pay the profits out as Management and Consulting fees on a 1099 at the end of the year without taking taxes out.
Shirley
---------- FOLLOW-UP ----------
QUESTION: Your answer makes sense, but it was so in-your-face simple that I want to follow up with this. Is it perfectly legitimate (following all LLC regulations for State of Georgia, USA) for an owner/governing body member to actively be employed and receive compensation along with end-of-year W2 the same as all other employees? Thank you in advance for your assistance.
I have two owners to the company I have been with for 28 years. They both receive Managment and Consulting fees each month which is 1099 income at the end of the year.
I also pay a salary to the owner that is the CEO of the company as an employee and he receives a W-2 for the salary he is paid at the end of the year.
I have been doing this for at least the last 10 years that he has been CEO of the company.
Shirley
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Answers by Expert:
Shirley McAllister, CPP, PHR
Expertise
I can answer payroll questions, payroll tax questions, 401K questions. No stock option questions please and I have some knowledge of other pensions but am most familiar with the 401K pension. I can answer U.S.and Canada payroll questions proficiently and have a good general knowledge of UK and South Africa and some knowledge of Australia and New Zealand Payroll procedures. Please do not ask me homework questions I do not have time to answer them.
Experience
25 years with an international company in the Human Resources, Payroll and Payroll Tax areas.
Organizations
SHRM, APA, I.O.M.A.
Publications
I.O.M.A. and BNA
Education/Credentials
P.H.R., C.P.P., Canadian Payroll Administrator, Successfully passed APA class on UK Payroll Administration.
Boise State University Human Resource Certification
Awards and Honors
APA Hotline Citation of Merit for last 8 years.
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