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Posted by cballard@tyyni.net on June 22, 2006, 8:58 pm
Please log in for more thread options Gary Goodman wrote:
>> Gary Goodman wrote:
>>> I'm probably missing some information, or my brain is fried.
>>>
>>> Client is retired, but has been offered a position with an
>>> LLC. He will own 5% of it and receive income. To negotiate
>>> the right amount, he wants to know if he will be a W-2
>>> employee and pay only his half of FICA, or must he receive
>>> guaranteed payments and have to pay both halves?
>> He's an employee if the LLC elects to be taxed as a
>> corporation. Otherwise, he's a partner for tax purposes and
>> gets a guaranteed payment.
> Katie, that's what I thought, but the client wants us to
> prove it. I think part of the problem is that he doesn't
> understand the rules of an LLC.
Take a look at the entity classification regulations
(commonly called the "check the box" regulations), reg
sections 301.7701-1, 301.7701-2, and 301.7701-3. Under the
regulations, any unincorporated association that has two or
more members is classified as a partnership by default
unless an election is made to treat the association as a
corporation.
It might also be helpful to show him Form 8832 and the
instructions to that form.
--Chris
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