Monday, August 2, 2010
A optional business structure that does not require payroll tax deductions
Used correctly, the following system will provide unusual privacy for all concerned.
1. Purchase a New Mexico limited liability company.
2. Prepare an operating agreement that includes information about how each member will be reimbursed for his work.
3. Obtain an EIN from the IRS.
4. At monthly intervals, pay each member for services rendered, with no deductions.
5. At the end of the tax year, file a tax return for the LLC. Send each member a K-2 statement of earnings.
Note: Members must be well paid because they will have to pay both the employer and employee taxes
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DISCLAIMER: I am not an attorney. The above information is for educational use only. Before proceeding, review your specific situations with your own attorney and CPA because each case is unique and each state has it's own payroll tax issues separate from the IRS.
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But, you need to be careful. The IRS has guidelines on whether workers are employees or independent contractors. This is an area of abuse because the costs are less for businesses (no FICA taxes, etc.) if they treat workers as independent contractors. Basically, the more direction and control you have over the worker's activities, the more likely the IRS will consider them an employee.
ReplyDeleteA worker who has to wear a uniform, punch a timeclock, work specific hours at a specific location, perform specific tasks, and use your equipment, is likely to be considered an employee.
http://www.irs.gov/businesses/small/article/0,,id=99921,00.html
Please send us some information
ReplyDeleteon a K-2 statement of earnings.
What is the form number.
Tom