guaranteed payment vs member draw for an LLC

Feb 18, 2010 1 Replies
J

-------------------------------------



Hi, My husband and I just started an LLC. We are trying to figure out what is the most strategic way to pay ourselves.



Is there a difference in the eyes of the IRS concerning guaranteed payments or member draws from an LLC?



Also, How do we pay quarterly estimated taxes? We don't think we will make that much this year. How do we determine whether or not we have to pay this?



Thanks


##-----------------------------------------------## Newsgroup Access Courtesy

formatting link
Tax and Accounting Software ForumsWeb and RSS access to your favorite newsgroup - misc.taxes.moderated - 25520 messages and counting!##-----------------------------------------------##.


Vote
Twitter Facebook LinkedIn
B

The purpose of a guaranteed payment is to pay one partner or LLC member in a way that is not proportionate to his ownership. If the LLC has two members and one does more work than the other he would get a guaranteed payment as if he were an employee. For example: The LLC earns $100,000 and Member A & Member B each own 50% If A gets a $ 10,000 guaranteed payment, then there is only $90,000 to split 50/50.

So if this situation is not relevant to your LLC, then there is no need for a guaranteed payment.

Your estimated tax could be calculated by annualizing quarterly income, then using tax tables to determine the annual tax, then taking 1/4 of that amount.

Vote
Twitter Facebook LinkedIn

Join the Discussion

Have something to add? Share your thoughts — no account required.

Didn't find your answer?

Ask the community — no account required