I am a 50% partner in an LLC (it has one other partner who also has 50%). Only I will get my regular pay/fees from the LLC. After that pay and all other expenses, my partner and I each own 50% of the profits.
What is the best way to handle my getting paid? Should I receive payroll from the LLC as an employee? Or should I be an independent contractor and receive a 1099? If it is possible for me to get a 1099, then that would be beneficial as I have many other expenses associated with my work for the company that would be eligible for tax deductions.
Our Response – By working for the LLC there are two ways to be paid which would be as a salaried employee or an independent contractor. If you are an employee, there is an additional payroll expense. If you receive 1099 income, this income would be reported as self-employment and would be taxed as such. In most cases being classified is going to be taxed lower than as an employee since the payroll taxes won’t have to be paid.
If you have a separate business that is performing the work for other clients in addition to the LLC though, you should be ok, but we would recommend double checking to be sure it is eligible as an independent contractor, otherwise there could be issues in being incorrectly categorized (See IRS info on Independent Contractor vs Employee)