LLC + S Corp Set-up

[dlanke]

Hello All,

I would like to start an LLC (in New York) with three partners,
Parter A, Partner B, and Partner C.

Profits generated from the business are to be shared as follows:
50% Partner A
25% Partner B
25% Partner C.

We intend to elect to be taxed as an S Corp, in order to
save on employment taxes.

In order to be compliant with the law, each owner will draw
a reasonable salary. We would like each partner's share in
the profits, including salary, be as described above.

One way to accomplish this is to have Partners B and C
draw the same amount as salary, and to have Partner A
draws twice as much. However, this is not appropriate,
since the amount of work to be performed by Partner A
will be less than that of Partners B and C.

My question is: How to set things up so that each partner's
share in the profits, including salary, is as described above?

Thanks,
Dan L.

 

[tranquility]

I don't think you can in the way you are describing. The profits must reflect economic reality and the salary is that, a salary. So, you will give a salary based on reasonable factors for the work each does and then you allocate profits for what is economically correct. (Based on work, investment and etc.)

You can't just manipulate reality to get what you want.

 

[dlanke]

Thanks for your reply tranquility.