Hello,
Myself and two other business partners have formed an LLC. All three of us will be managing members splitting all profits and losses equally. We have no employees. I've researched a ton on the net and haven't been able to come up with concrete answers for these questions:
1.) Do LLC members have to draw a regular salary throughout the year (not talking about guaranteed payments or lease/ loan payments to members from the LLC), just a simple salary like you get from your 9-5 job? If so, I hear the term "reasonable salary" - please define.
2.) If #1 is yes you do have to draw a salary, is this regular salary taxed the same as "Pass Through" Profits/Losses distributed at the end of the fiscal year, meaning that both regular salary and distributions are taxed only by self employment taxes? If #2 is yes they are taxed the same why would you have to take a salary if the tax end results in paying the same amount of taxes.
3.) If LLC's don't have to pay a regular salary to it's members and if all three members of the LLC perform duties which could qualify for guaranteed payments, do we absolutely have pay distributed payments or can we elect not to receive distributed payments and elect to take profits/losses solely during year end distribution of profits/losses. (Please keep in mind this question is under the scope of federal taxes, I know states have their own little caveat's here. I am going to also consult a tax consultant on this issue as well; I am just trying to get as much info as possible before inevitably hiring a CPA. FYI I also am aware that salaries go in to operating expenses and therefore lower net income so I see the advantages of actually paying a salary, I just want to know what is mandatory.). Thanks,
Joe
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