FUTA Liability

[Nashville]

An LLC files as a partnership, with five partners with unequal shares.

The LLC has a payroll of 15 employees, including the partners. Each of the partners is on the payroll, drawing a salary.
Most of us have been taught that the "classic" pay arrangement for a partnership is for partners NOT to be on payroll
but instead draw "guaranteed payments".

Under this scenario, are the partners subject to FUTA?

[TaxGuyBill]

I think that according to the IRS, the partners CAN'T receive payroll.

http://www.aicpa.org/publications/taxadviser/2013/november/pages/brock_nov2013.aspx

https://www.charitableplanning.com/document/673791

[Nashville]

Back to FUTA

Thanks Bill, and I don't disagree with you.

But are the partners subject to FUTA in the above-described situation?

[mastertaxguy]

Futa liability-partnership

1. Your scenario suggests the partners received guaranteed payments.
2. Guaranteed payments are not wages for FUTA. Thus, they would not be entered on the FUTA forms as wages paid.
3. The partnership, not the partners would be the 'first in line' for liablity for unpaid FUTA balances for other employees.
4. The partners, if general partners, might have some liablity down the road for unpaid FUTA balances if such exists but that is NOT A TAX ISSUE.

[TaxGuyBill]

I would say based upon Revenue Ruling 69-184, NO, it is not subject to FUTA.


Bona fide members of a partnership are not employees of the partnership within the meaning of the Federal Insurance Contributions Act


It's possible the Regulations show something else, but I don't see anything.

http://www.law.cornell.edu/cfr/text/26/part-31/subpart-D

[Roland Slugg]

The LLC has a payroll of 15 employees, including the partners.

No, the LLC has a payroll of 10 employees. Partners are not employees, and their remuneration is not wages subject to withholding or employment taxes.