LLC member gets a W2

[Bjorn]

A very large and respected accounting firm in my area set up the following business relationship.

ABC LLC runs a nursing home.

Its sole member is XYZ LLC.

The two couples are the four members of XYZ LLC.

They claim it is OK for the four to be W2 employees of ABC because they are not personally a member.

So they are employess of ABC and members of XYZ. They are doing this for workers compenastion reasons.

Does this sound like smoke and mirrors or is this a safe idea? I supposed it is about the same if they do it on a 941 or a member of an LLC.

Mahalo,

Bjorn

[S T]

Confused LLC

Well I am just getting my feet wet so to speak on LLC entities, as not alot are done in Calif due to the Gross Receipts Tax.

So I am confused So I guess I will show my ignorance on this subject.

You state one member (single) in one sentence then state two couples (4 members) in another part of the sentence. Wouldn't only the single member be the ownership and the other 4 members only be employees and no ownership. If they actually had ownership then it would be a Partnership or an S Corp, correct? Work Comp you can elect to include or exclude on the Work Comp policy and report accordingly and pay premiums regardless of W-2 wages.

How was the 8832 filed for disregarded entities. Single Member, Partnership, S Corp, etc.

How can it be both ways?? Can you have one scenario for taxes and a different scenario for Work Comp?

I have encountered a problem on Worker's Comp on a partnership, and we had to take the a spouse of a partner off of W-2 wages so that we would not be subject to Work Comp premiums and excluded.

Sandy

[OldJack]

An LLC is a state entity... not a federal entity.

Workers compensation is a state issue... not a federal issue. Workers comp can be covered for the self-employed's employees or employees of other entities so having it done thru a LLC is no different than as a self-employed business or partner in a partnership, other than maybe at a different insurance rate or the restriction of liability. As self-employed individuals, however, these 4 workers would not have workers comp insurance in some states unless they are employees on a W2.

For federal tax purposes the ABC, LLC is disregarded and the profit reported on the XYZ, LLC which is disregarded and reported by default as a partnership of the 4 individuals. Since for federal taxes it is a partnership, the partners should not receive a W2, rather all payments should be as guaranteed payments or partner distributions of profit. Although it is not correct, considering the facts of the business operation, I would possibly agree for other business purposes (ie: liability) to let them be paid as W2 employees.

However, if the ABC, LLC elects to be taxed as a S-corp the 4 individuals should work for ABC as W2 employees.

[sea-tax]

Basically If I understand you correctly Because XYZ llc owns ABC LLC then the client feels it is ok for them to be on payroll in ABC LLC .

Well , I can say it is creative at best and bordering push the envelope .

I can understand the logic sort of , XYZ LLC owns ABC llC not the members so any work they do would be as an employee.

But as someone stated if ABC is a sole LLC then it is disregarded and I think that is where you will have trouble.