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Old 04-16-2008, 02:24 PM
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Will K-1's from actively participating members of an LLC be subject to S/E Taxes?

Will K-1's from actively participating members of an LLC be subject to S/E Taxes?

My CPA says that as an active partner of an LLC that has a fairly decent profit, I am required to pay Self-Employment taxes on the so called "K-1 distributable share of income."

Is this correct? Because, I also have an S Corporation and the K-1 from the S-Corporation is not subject to S/E taxes?

This should not be the case, as the LLC has been touted as a better Entity!!



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Old 04-24-2008, 12:32 PM
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Your CPA is correct when he says that you as an actively participating shareholder are required to pay Self-Employment taxes on the so called "Net income that is reported on K-1 from your LLC.

The S corporation K-1 is different from that of the LLC because the share of the profits reported on the K-1 is generally not subject to S/E Taxes. Although, this is a distinct advantage of the S Corporation, this advantage may be very short-lived as Congress is taking a closer look at equalizing this treatment.

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