Msg#: 3272630 posted 3:05 pm on Mar 6, 2007 (gmt 0)
We are in the process of starting our e-commerce and are going to form LLC soon. From what I've read so far we have to choose some safe amout to pay ourselves so that it wouldn't be red flag to IRS. I assume that for the first 1-2 years our LLC won't generate profits and it will be mostly losses. If it was up to me I wouldn't pay anything to myself because we will keep our day jobs to support ourselves and invest to develop our ecommerce. However, if I understand right you have to pay yourself some salary.
Could you please suggest what should the range to pay yourself, so it won't be too little or too much from IRS point of view.
Msg#: 3272630 posted 11:06 pm on Mar 6, 2007 (gmt 0)
This is definitely one of those questions where everyone's situation is different. A lawyer with a profitable LLC is not going to pay the same as a web designer with a break-even LLC or an Amway distributor with a money-losing LLC.
It all depends on your business, your industry, your location, etc.
Msg#: 3272630 posted 3:19 pm on Mar 7, 2007 (gmt 0)
It's also going to vary by state, and whether it's a sole-member, or other type of LLC. For me as a sole-member LLC, I just end up doing a Schedule C on a personal return. No real 'salary' setup per se. (I'll probably change this this year as I add an employee.)
For any LLC questions be sure to visit your state government website (usually Secretary of State, Dept of Revenue, or similar), and you'll probably find a lot of useful information particular to your state (every state I've looked at forming an LLC in has had a large amount of information on their website). Also, sba.gov usually has good resources. In general, when relying on something you're reading be sure it's coming from a trusted source.
Msg#: 3272630 posted 2:18 pm on Mar 9, 2007 (gmt 0)
In order to benefit from the LLC and to help avoid audit risks, the members need to be paid gross wages of AT LEAST 20% of the profits from the LLC.
How about a citation for the above. And what the heck country is this being posted about? I'm not aware of any such fixed rule in the USA. There are people here from the USA and the UK (at least) talking about tax regs.