Category Archives: Small Business Finances

Financial matters for small business

How to Pay a Shareholder of an S-Corp

When you are just an investor in an S-Corp, ostensibly you do not work for the business and you do not participate in its management as an officer. You are therefore considered limited in your liability and your income from the business based on your ownership share of the business is usually considered passive income.

How to Get Paid as an Officer and Shareholder of an S-Corp

As an officer and shareholder in an S-Corp, some of your income is considered earned income subjecting it to higher taxes, while some income can be considered passive income subjecting it to lower taxes. This post looks at how getting paid affects the officer, corporation, and shareholder to achieve a maximum after tax return.

How to Pay a Non-Partner General Manager of Limited Partnership

In some cases, all the partners of a limited partnership may be investors only and not managers. The partnership may hire an outside general manager (employee) to make the day-to-day decisions, and therefore, acts as the manager. In this case, the general manager is an employee of the business, but since they are not a partner (aka owner), their income is just like that of an employee in any business.

How to Pay a Limited Partner of Limited Partnership

When you have an investor in your partnership, who works less than 500 hours in a given tax year for the partnership, and they do not participate in its management, they are considered limited in their liability and their income is usually considered passive income subjecting the income to only federal and state income taxes based on their marginal tax rate.

How to Get Paid as a General Partner of Limited Partnership

A partner in a limited partnership that is a decision-maker (general partner) is considered an employee of the business by the IRS and is treated differently than limited partners. Income for general partners is considered earned income and is subject to additional taxes but also to additional potential tax deductions. Moreover, as a general partner, you are exposed to additional liabilities.

How to Pay a Non-Member General Manager of a Multi-Member LLC

In some cases, all the members of an LLC may be investors only and not managers. The business may hire an outside general manager (employee) to make the day-to-day decisions, and therefore, acts as the manager. In this case, the general manager is an employee of the business, but since they are not a member (aka owner), their income is just like that of an employee in any business.

How to Pay a Non-Manager Member of a Multi-Member LLC

When you have an investor in your LLC, who works less than 500 hours in a given tax year for the LLC, and they do not participate in its management, they are considered limited in their liability and their income is usually considered passive income subjecting the income to only federal and state income taxes based on their marginal tax rate.

How to Get Paid as a Manager Member of a Multi-Member LLC

A member in an LLC that is a decision-maker (manager) is considered an employee of the business by the IRS and is treated differently than non-manager members. Income for managers is considered earned income and is subject to additional taxes but also to additional potential tax deductions. Moreover, as a manager, you are exposed to additional liabilities.