Background: Company A LLC
Company A LLC is a Florida LLC. For tax purposes, this LLC is a Partnership. The company was formed in 2014 and at the time had 4 partners. Today the company has 3 partners.
Company A LLC current partners are as follows:
Company B LLC, a Wyoming LLC has 92.5% ownership
XXX LCC, a Florida LLC has 5% ownership
YYY LLC, a Florida LLC has 2.5% ownership
Company A provides IT staffing and Recruiting Services. Currently Joe has been responsible for all of the activities related to the company. We may have employees in the future, but currently Company A does not have any employees on payroll.
2016 will be the first profitable year for Company A. Profits are expected to be between $150k- $200k.
The current Manager of Company A is Company B LLC.
Company B LLC
Company B LLC is a Wyoming LLC and was formed a couple months earlier than Company A. It is essentially a holding company for Company A and any future companies that Joe may start or buy. For tax purposes, this LLC is currently a Disregarded Entity; however Joe is planning to convert it to an S Corp in the very near future (this week or next).
The current Manager of Company B LLC is Joe.
Questions
1. So far this year, Company A has not disbursed any income to its Partners. Should Company B;s conversion to an S Corp occur before and income is disbursed?
2. Should Joe be on Company A;s payroll, Company B;s payroll, or both to minimize Joe;s overall tax burden?
3. If the answer is to #2 is that Joe should just be paid out of Company B;s payroll, should his salary be based on his work as a Manager of Company B and also Company A or should his payroll be based on his IT Recruiting work that he is doing on behalf of Company A? Essentially, I;m trying to figure out what an acceptable salary is for Joe that will minimize Payroll taxes.