How does an LLC have to pay it's owners/shareholders?
Is there a requirement?
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Listen to the audio
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In this audio snippet, you'll hear about:
- No requirement.
- An LLC is not even required to pay it's members at all
- Constructive receipt
- At the end of the year, whether you took money out of the entity or not – you'll get taxed on it
Audio Transcript
Travis:
Great. First one is pretty basic, and I think that we've covered it
before but let's just make sure we've got it all out in the open. How
does an LLC have to pay its owners/shareholders? Is there a
requirement?
Yosef:
No.
Travis:
There's no requirement.
Yosef:
If you're an LLC, then in terms of the IRS you are a partnership,
unless you file and check the box regulation to be taxed separately.
Travis:
Right.
Yosef:
A partnership generally does not have to pay its members anything.
Travis:
All right.
Yosef:
Now the flip side, by the way, is typically what will happen is when,
let's say, you have a very successful partnership. Say that partnership
earns a million dollars at the end of the year. If the partnership is
still sitting on that money and has not distributed out to the
partners, the partners will still have to pay tax on that million
dollars.
Travis:
Ahhh.
Yosef:
Whenever we see that it's called constructive receipt.
Travis:
OK.
Yosef:
So that's a consideration to keep in mind.
Travis:
All right, so either way at the end of the year, whether you took the money or not, you're going to get taxed on it.
Yosef:
Yes. Out of an LLC.
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