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BRICOMP
July 30, 2021
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LLC Partnership and Employees

  • July 30, 2021
  • 1 reply
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My wife and I have an LLC we have run for 12 years. We have always taken distributions and filed K1 / business 1065. In the past we have always used contractors and issued/filed 1099s when appropriate but we are looking to convert one contractor to employee status with an annual salary.

 

1) Does that impact how the LLC partners (me and my wife) are paid? Must we issue ourselves W2s now?

2) I get we can't convert 1099 people in QuickBooks - is there any issue paying the 'salary' as a 1099 for the remainder of the year having the employee deal with their own taxes like normal, and then in 2022 creating an employee record?

3) Any gotchas I am missing?

Best answer by Rustler

LLC is not a business type, you are a partnership. All an LLC filing does is isolate your personal assets from the company in the event a law suit goes against the company.

 

Partners in a partnership are not allowed to be on payroll, you continue to take equity draws (not distributions which are only used in a chapter S corporation).

 

Yes you can hire what was an independent contractor, a QB "quirk" requires that the employee name must be different, so add in an initial or something.

 

1099 payments and salary are two different animals, the tradesman gets paid as 1099 for the period that he did the work as a 1099 contractor, and received a w-2 for the period you hired him.

1 reply

Rustler
RustlerAnswer
July 31, 2021

LLC is not a business type, you are a partnership. All an LLC filing does is isolate your personal assets from the company in the event a law suit goes against the company.

 

Partners in a partnership are not allowed to be on payroll, you continue to take equity draws (not distributions which are only used in a chapter S corporation).

 

Yes you can hire what was an independent contractor, a QB "quirk" requires that the employee name must be different, so add in an initial or something.

 

1099 payments and salary are two different animals, the tradesman gets paid as 1099 for the period that he did the work as a 1099 contractor, and received a w-2 for the period you hired him.

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