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"If it sounds too good to be true it probably is." Thank you for making this video. Somewhere before this I read that I didn't have to pay myself and came to the conclusion that I didn't have to pay tax on my labor. I already signed up yesterday for your workshop on the 13th so I look forward to acquiring more useful information.
Regarding the Partnership status, the limited partner does not pay the self-employment tax. That's one way to save the 15.3%, the general partner will have earned the active income and the limited partner's income would be considered passive. The general partner pays the 15.3% and the limited partner doesn't. If both are general partners then both incomes would be considered active and are subject to the 15.3% SE for each partner.
@Dario Olivere you are correct. Good additional clarification! Only SE tax the limited partner would be subjected to is if they receive a guaranteed payment(s).
Im assuming it’s similar for scorp? Me and my fiance have an llc, she is an employee shareholder, im not an employee of the llc just a shareholder. I know I don’t have to pay myself a salary since im not active, but how would i pay myself if the llc has left over profit after her salary and expenses, would i just take my percentage of distribution that belongs to me -and she would take the rest of the distribution?
Great video. Question in regards to this. As an H1B VISA holder, I am not allowed to have active income other than my actual W2 job. I am trying to start my real estate portfolio with your methodology, with long term rentals (thus passive). Is it possible for the WY-LLC to be a partnership (me and wife), collecting income from a bunch other out of state LLCs and Land Trusts, thus filing a 1065 yearly? We would not be taking any money out of the WY-LLC for personal use since we are using our W2 jobs for our income, and thus do not need income from the WY-LLC. Instead, we would probably just have the WY-LLC re-invest its own income. Would this still be considered all passive?
He always on point. Am thinking about creating a Wyoming LLC for my business but I don't know of a way not to lose my anonymity due to applying for sale tax exempt.
Clint, How does a disregarded llc that is only used as a beneficiary to a land trust on a primary residence for liability protection generate income? It doesn’t appear to fit active or passive income since no income is generated. How does it work? There’s no income to pass through to the member. I didn’t see a video that seemed to speak on this aspect concerning income and salary for this type of asset protection. If there is one please share the link with me. P.S. The education you provide is priceless. Thank you 👍
I appreciate the support. To get the best answer tailored to your specific circumstances, I recommend scheduling a free consultation with my team. Visit: aba.link/lk2
How would I pay myself if I worked for an operating single-member LLC owned by a single member Wyoming Hold LLC (I am the owner of both)? Would the holding company LLC be the S-Corp, or the operating company LLC? Would I pay myself from the operating LLC or the Holding? I am wanting to have the asset protection of the holding LLC and the tax benefits of teh S-Corp. Thanks!
Hey Clint! Looked forward to joining your seminar on ZOOM this past Saturday, but would not let me in. Tried it multiple times. Is there a replay available? A recording, maybe?
What about self storage? Its an LLC, but Its not subject to employment taxes. If i file as an S-Corp will I need to pay those taxes? Or can I even do that?
First of all, thank you very much for this video! Really easy to understand! However, I do have one thing I am confused about. Aren't S-Corps required to pay owner employees a "reasonable" salary before dividends bypass payroll taxes and cap gains? If this is correct, then LLCs electing S-Corporation tax treatment are required to, vs simply electing to, pay active owners a salary right? Otherwise any distributions taken will be subject to capital gains tax in addition to their personal income tax right? The only entities that can elect to or not to pay active owners a salary would be C Corps or an LLC with C Corp tax treatment right? They could potentially avoid payroll taxes but would be subject to 21% on the 1120 and short term capital gains tax (which is like 15% right?) on dividends thereafter.
Ok to tackle this one I am going to go deep. The Internal Revenue Code and Treasury Regulations do not provide explicit requirements for S-corporations to pay a salary to their owners or employees. However, they do provide guidelines on how salaries and other forms of compensation are treated for tax purposes. Section 162(a)(1) of the Code allows a deduction for all of the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business, including a reasonable allowance for salaries or other compensation for personal services actually rendered. This suggests that S-corporations can deduct reasonable salaries paid to owners or employees as a business expense. The key phrase is "any trade or business". Is the activity the LLC engages in considered a trade or business giving rise to the salary requirement. Furthermore, Section 1366(e) of the Code provides that if an individual who is a member of the family of one or more shareholders of an S corporation renders services for the corporation or furnishes capital to the corporation without receiving reasonable compensation therefor, the Secretary shall make such adjustments in the items taken into account by such individual and such shareholders as may be necessary in order to reflect the value of such services or capital. This suggests that if an owner or employee of an S-corporation is not receiving reasonable compensation for their services, adjustments may be made to reflect the value of these services. In conclusion, while there are no explicit requirements for S-corporations to pay a salary to their owners or employees, the Internal Revenue Code and Treasury Regulations provide guidelines on how salaries and other forms of compensation are treated for tax purposes.
A Question For You Clint, How Are Online Businesses Categorized By The IRS? Active Or Passive? They Usually Require A Set Up And Minor Monitoring Throughout The Year! Thank You For Another Educational And Informative Video! 🙏
I heard somewhere about a 700 hour rule or a living off the income rule/primary income rule. I don't know if any of that is applicable or true, but it might be a good place to start research.
After exhausting all of the tax reducing laws available to me on a rental after the first year (including the cost segregation and bonus depreciation) and you don’t plan on selling (1031), how do we continue to keep our tax burden low?
What should you do if you are a part owner of a partnership and you find out that the other owner has been paying you a W-2 salary? Is it a criminal offense that you should report?
You can not. If the business was already established you might be able to if you could show the business was providing a service to your existing company. But then again the income you pay is taxable to the new company.
