Welcome Guest. Register Now!  



Reply
 
LinkBack Thread Tools Search this Thread Display Modes
  #1 (permalink)  
Old 02-28-2017, 03:49 PM
Junior Member
 
Join Date: Feb 2017
Posts: 1
Inactive spouse as member of LLC w/S-Corp filing status

I've been considering a 50/50 LLC taxed as an S-Corp for my wife and me. She receives 1099 income and would take reasonable compensation as an active member. I would not participate in the business activity, which is tied to her labor. Do I have to take a salary, or can we split the remaining profit as a dividend? Thanks for any advice.



Digg this Post!Add Post to del.icio.usBookmark Post in TechnoratiFurl this Post!Reddit! stumble!bookmark in google!Share on Facebook!
Reply With Quote
  #2 (permalink)  
Old 03-01-2017, 01:53 AM
Moderator
 
Join Date: Oct 2010
Posts: 4,768
I've been considering a 50/50 LLC taxed as an S-Corp for my wife and me. She receives 1099 income and would take reasonable compensation as an active member.========>No 1099 for her as one of the shareholders of the S corp. Reporting S Corp officers' comp on a 1099 is rarely acceptableCorporate officers are statutory employees. Independent contractor treatment isn't appropriate. As an employee of the corp, she is generally paid wages or salary for services rendered to the corp. To the extent that an S Corp has net profits, those profits flow through to the shareholders in proportion to their ownership, and that information is reported on a Form K-1 of 1120S and on 1040 NOT on Sch C of 1040 so 1099 for her an S corp shareholder/officer.



I would not participate in the business activity, which is tied to her labor. Do I have to take a salary, =====>No not necessarily; Shareholders can be uninvolved investors, but S corps often have shareholders who are also officers of the company. When shareholders act as officers, they must receive compensation for their services as employees of the corp in the same way they would receive compensation if they were not shareholders. However, officers who do not perform any services or perform only minor services are not necessarily entitled to compensation or considered employees of the S corp.

or can we split the remaining profit as a dividend? ==============>yes; Shareholder distributions are treated differently than wages because they are deemed to be a return on the investor/employee?s investment in the S corp and not compensation for services rendered.Distributions to a shareholder must be included in the shareholders 1040s; however, the distributions are not subject to FICA tax and are not considered self-employment income subject to self-employment tax.



Digg this Post!Add Post to del.icio.usBookmark Post in TechnoratiFurl this Post!Reddit! stumble!bookmark in google!Share on Facebook!
Reply With Quote
Ads
Reply


Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

vB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
HH Filing Status under Abandoned Spouse Rules rogo Filing Requirements 0 02-20-2014 03:59 PM
Inactive s-corp tcvgsu S-Corporation 0 02-24-2011 07:20 PM
28 year inactive corp in NJ tagofo C-Corporation 0 02-06-2011 07:25 AM
Late filing of Form 2553 for S Corp status totalnet S-Corporation 0 03-13-2009 12:24 AM
Filing status: My Spouse and I work in different states damonk258 Income 0 02-04-2009 08:59 AM

Follow us on Facebook Follow us on Twitter Google Buzz Rss Feeds

» Categories
 
Individual
 » Income
 » IRA/Sep
 » Medical
 
Corporations
 » Payroll
 
Forum for CPAs
 
Financial Planning