SMLLC Employing Child

[Jesse]

If Dad hires kid(17) to wash dishes in his business "ABC Restauraunt, LLC", is the kid exempt for FICA and FUTA if the business is a Single Member LLC (disregarded entity filing Schedule C)?

[Kram BergGold]

My feeling

I don't know this for a fact but I would assume if it is a disregarded entity the kid would be exempt. Remember on the kid's 18 birthday he is covered by FICA and maybe SUTA.. FUTA not till 21.

[cpadan]

If Dad hires kid(17) to wash dishes in his business "ABC Restauraunt, LLC", is the kid exempt for FICA and FUTA if the business is a Single Member LLC (disregarded entity filing Schedule C)?

That is true. Would also be exempt in a partnership where the only partners were the parents.

[newbie]

That is true. Would also be exempt in a partnership where the only partners were the parents.

I was not aware of this, is it true whether a form 1065 is filed or must it be 2 schedule C's?

[S T]

Circular E or Pub 15

Yes it is true, if the SMLLC is disregarded entity and filing as Schedule C sole, then the family member (child) can be exempt from FICA, MCare, Futa, look to your State for the State exemptions. Family Member (child) must be under 18 to exempt from FICA, MCare and under age 21 for Futa. Again State payroll could be different.

On partnerships, if both parents are the partnership same rule applies, but if only one parent is a partner in the partnership, other rules apply.

See page 9 of Pub 15.

3. Family Employees Child employed by parents. Payments for the services of a child under age 18 who works for his or her parent in a
trade or business are not subject to social security and Medicare taxes if the trade or business is a sole proprietorship or a partnership in which each partner is a parent of
the child. If these payments are for work other than in a Regulatrade or business, such as domestic work in the parent’s private home, they are not subject to social security and
Medicare taxes until the child reaches age 21. However, see Covered services of a child or spouse later. Payments for the services of a child under age 21 who works for his or
her parent, whether or not in a trade or business, are not subject to federal unemployment (FUTA) tax. Although not subject to FUTA tax, the wages of a child may be subject to
income tax withholding.

http://www.irs.gov/pub/irs-pdf/p15.pdf There is also a good table of types of payments and whether subject to FICA, Mcare, FUTA starting on page 31 of Pub 15.

Sandy