LLC Ownership Stake in General Partnership and Employee Status

[sleapz]

California

Here's my question:
If I have an ownership stake in a LLC, which in turn has an ownership stake in a general partnership, can I be an employee of the of the general partnership while at the same time being a manager of the GP on behalf of the LLC that has an ownership stake in the GP.

This question arises because the other potential partnership members wish to form a general partnership rather than a LLC to avoid paying the California taxes on the LLC revenue (would be $6800 annually). This makes me apprehensive because then personal assets are on the line, so I'm looking for a way to protect my personal assets while still taking part in the general partnership.

Alternatively, as the majority owner of the LLC that has an ownership stake in the GP, can I take compensation in the form of a salary on behalf of the LLC for work done as part of the GP?

Thanks for the advice.

 

[davew128]

Partners cannot be employees in their own partnership under federal tax law. I do not know if that applies to being an employee of a lower tier partnership owned by the partnership (LLC) nor am I inclined to research it. Why I won't dispute that the LLC gross receipts fee can be onerous in CA, why wasn't entity structure discussed BEFORE setting it up?

 

[sleapz]

Partners cannot be employees in their own partnership under federal tax law. I do not know if that applies to being an employee of a lower tier partnership owned by the partnership (LLC) nor am I inclined to research it. Why I won't dispute that the LLC gross receipts fee can be onerous in CA, why wasn't entity structure discussed BEFORE setting it up?

It hasn't been set up yet and is still being discussed. I'll likely still push for a LLC rather than GP, for obvious reasons, but I'm exploring different scenarios. While you aren't inclined to research it, can you point me to resources that would be helpful?

 

[quincy]

It hasn't been set up yet and is still being discussed. I'll likely still push for a LLC rather than GP, for obvious reasons, but I'm exploring different scenarios. While you aren't inclined to research it, can you point me to resources that would be helpful?

Here is a link you may find helpful, from the Kauffman Foundation, on "Six Forms of Doing Business:"
http://entrepreneurship.org/~/media/Entrepreneurship/Files/Entrepreneurship/Entrepreneurship/Six Legal Forms of Business.pdf

Please note this sentence in the beginning paragraph: "The reality is that you must rely on the advice of attorneys and accountants to help you make this decision."

You really should seek the advice of professionals in your area to assist you in setting up your business. That will be the best way to avoid problems in the future.

Good luck.