guaranteed payment vs member draw for an LLC


J

jrtoom

-------------------------------------

Hi,
My husband and I just started an LLC. We are trying to figure out what is
the most strategic way to pay ourselves.

Is there a difference in the eyes of the IRS concerning guaranteed
payments or member draws from an LLC?

Also, How do we pay quarterly estimated taxes? We don't think we will make
that much this year. How do we determine whether or not we have to pay
this?

Thanks



..
 
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B

Breck O'Bummer

jrtoom said:
-------------------------------------

Hi,
My husband and I just started an LLC. We are trying to figure out what is
the most strategic way to pay ourselves.

Is there a difference in the eyes of the IRS concerning guaranteed
payments or member draws from an LLC?

Also, How do we pay quarterly estimated taxes? We don't think we will make
that much this year. How do we determine whether or not we have to pay
this?
=======
--
The purpose of a guaranteed payment is to pay one partner or LLC member
in a way that is not proportionate to his ownership. If the LLC has two
members and one does more work than the other he would get a guaranteed
payment as if he were an employee.
For example:
The LLC earns $100,000 and Member A & Member B each own 50%
If A gets a $ 10,000 guaranteed payment, then there is only $90,000 to
split 50/50.

So if this situation is not relevant to your LLC, then there is no need
for a guaranteed payment.

Your estimated tax could be calculated by annualizing quarterly income,
then using tax tables to determine the annual tax, then taking 1/4 of
that amount.
 

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