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Old 11-01-2016, 12:15 PM
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Loans and wages

The scenario is as follows:

1) New company ? LLC. One partner until 4/1/17. One W-2 employee who will transition to partner Q2 2017. He has to be a W-2 employee until then for purposes of a pending personal mortgage. Their agreement is written as such.
2) The W2 employee is going to deposit $50k of his personal money into the company as a loan to cover his payroll until he is made a partner on 4/1/17.

If he makes the loan as noted above isn?t he technically being taxed on the $50k twice. He was taxed on the $50k made this year personally which he is using to loan to the company and now he will be taxed again on the $50k through W-2 wages.

Is there another way to do this to avoid this and still have the W2 needed for the loan?



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Old 11-02-2016, 03:53 PM
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1) New company ? LLC. One partner until 4/1/17. One W-2 employee who will transition to partner Q2 2017. He has to be a W-2 employee until then for purposes of a pending personal mortgage. Their agreement is written as such.==.So the LLC is actually SMLLC with one W2 employee.


2) The W2 employee is going to deposit $50k of his personal money into the company as a loan to cover his payroll until he is made a partner on 4/1/17.==>>then the LLC becomes an MMLLC after 4/1/2017 as the w2 employee becomes a new member of the LLC from 4/1/2017

If he makes the loan as noted above isn?t he technically being taxed on the $50k twice. He was taxed on the $50k made this year personally which he is using to loan to the company and now he will be taxed again on the $50k through W-2 wages.========>in general payroll taxes are from a MMLLC?s earnings not from the partner?s loan to the MMLLC. However, if he himself pays his own payroll taxes with his own money then yes; however, You should understand that as a lender to the MMLLC, you are a creditor. As such your creditor status can be structured to be subject to be ahead of member distributions or draws, so that you are not in essence "paying yourself". You can also setup a so called "sinking fund" which is a amount of monies set aside from revenues that is solely dedicated to satisfying the loan. Again, this can be made a priority to member distributions.

Is there another way to do this to avoid this and still have the W2 needed for the loan?=======>>>>>>>as said, Loans from the MMLLC partner to the MMLLC should be no different than bank loans. Details of the loan should be put in writing. Any collateral or consequences for default should be detailed in advance, as well as payment terms and interest rates. The payment schedule needs to be specified and followed; It is best to include anything a bank loan might have, but this mechanism does provide extra flexibility for both the MMLLC and the partnerJust like any shareholder loan, these types of loans may bring tax advantages. The primary tax advantage is that while the interest that is charged has to be claimed as income, at least the MMLLC can deduct the interest as an expense.



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Old 11-02-2016, 06:16 PM
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note;A MMLLC by default is treated as a partnership. This means that the LLC?s income and deductions get reported on a partnership tax return on 1965. And then that tax return allocates the income and deductions among the partners, or LLC members. So MMLLC member never pays payroll taxes as MMLLC memeber is not an W2 employee but MMLLC member needs to pay self employment tax on their guaranteed payment I mean their wages



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