What is the name of your state (only U.S. law)? WASHINGTON STATE
Hello all,
I have a LLC registered in Washington state. For federal tax purposes, the LLC is currently being treated as a partnership (as per the IRS EIN letter, I am required to file Form 1065). The LLC is a member-managed company with two members including myself and my spouse. I can add two more members who are my spouse's parents, if that will help.
I am contemplating an election to be classified as a S-corporation. Whether I will do that or not depends on the answers to the following questions:
1) I will be working as a contractor for a company located in California. The wages will be in the name of the Washington state LLC and the contract is between the Washington state LLC and the California employer. Are the wages subject to the California personal income tax or any other taxes if the Washington state LLC is classified as a:
a) S-corporation?
b) partnership?
2) It is my understanding that a reasonable salary has to be paid to the LLC members if the LLC is classified as a S-corporation. I will be doing the contracting work but I would like my wife (or her parents) to receive the salary while I receive none. Is this possible without violating the reasonable salary rule? For example, if the contract work (which I will be performing) will gross $100,000 this year, the LLC will pay my wife (or her parents) $70,000 with the remaining distributed to me in the form of dividends. The reason for this strategy is that I do not wish to report any income on my Social Security number. I am not sure if the IRS has any way of knowing who is performing the work (since the wages are being paid to the LLC's TIN number) so as long as the salary is reasonable, there shouldn't be any problems, right?
Thanks in advance for your advice.What is the name of your state (only U.S. law)?
Hello all,
I have a LLC registered in Washington state. For federal tax purposes, the LLC is currently being treated as a partnership (as per the IRS EIN letter, I am required to file Form 1065). The LLC is a member-managed company with two members including myself and my spouse. I can add two more members who are my spouse's parents, if that will help.
I am contemplating an election to be classified as a S-corporation. Whether I will do that or not depends on the answers to the following questions:
1) I will be working as a contractor for a company located in California. The wages will be in the name of the Washington state LLC and the contract is between the Washington state LLC and the California employer. Are the wages subject to the California personal income tax or any other taxes if the Washington state LLC is classified as a:
a) S-corporation?
b) partnership?
2) It is my understanding that a reasonable salary has to be paid to the LLC members if the LLC is classified as a S-corporation. I will be doing the contracting work but I would like my wife (or her parents) to receive the salary while I receive none. Is this possible without violating the reasonable salary rule? For example, if the contract work (which I will be performing) will gross $100,000 this year, the LLC will pay my wife (or her parents) $70,000 with the remaining distributed to me in the form of dividends. The reason for this strategy is that I do not wish to report any income on my Social Security number. I am not sure if the IRS has any way of knowing who is performing the work (since the wages are being paid to the LLC's TIN number) so as long as the salary is reasonable, there shouldn't be any problems, right?
Thanks in advance for your advice.What is the name of your state (only U.S. law)?