hi lee phillips again i want to talk to you about taxation of a multiple member llc
multiple member means that there are two or more owners of this LLC now if it's a single member
or one owner we've talked in another youtube we've talked about your taxation choices there
let's talk about your taxation choices and a multiple member llc in any choice you have
you're going to have to get an EIN a tax identification number for the IRS
you can't use your social security number in one of your choices on the sole proprietorship
you could use your social security number but in this case no you have to have an e i
n for your company they're easy to get we have a youtube on how to get your EIN
e-i-e-i-n or old macdonald something like that but you get your tax ID
then you get to choose how you're going to have it taxed you have three choices
first of all you can have it taxed as if it were a partnership you will follow all of the
tax rules you'll file your 1065. you're going to get K-1s to each one of the the the partners now
you're not partners you're members in an llc but as far as the IRS knows you are partners
they are treating you as if you are a partnership so by the way you understand that you never have a
partnership because of the liability issues you're not only live and we've got another youtube on
the liability of a partnership but you never have a partnership because each one of the partners is
jointly and severally liable for what the other guy is doing well in this case you have an llc
you get all of the asset protection the corporate shield the charging orders
and we have other youtubes on all of those you get those asset protections but you are taxed
as if your partnership when are you going to choose to be taxed as a partnership
well let's think about that for a minute the other choice that you have is a sub chapter s entity
an entity taxed under subchapter s of the IRS code now you can have a corporation and choose
to have it taxed under Subchapter S or you can have an LLC and have it taxed under Subchapter S
the entity requires a tax id number it files an actual tax return but then everything
passes through to the owners the members and they pay the tax so there's no actual tax owing
by the entity the Subchapter S LLC but it has to file a tax return but the tax is actually paid
at the members level it's a pass through entity you can also have your multiple member LLC taxed
under Chapter C of the IRS code you've heard of a c corporation well you can have a C LLC as well
it's just an entity taxed under Chapter C of the IRS code and in a small business you're going to
be really hard-pressed guys to give me a good reason why you should have a Chapter C entity
the entity itself actually files a tax return and it actually pays the tax
it's very difficult to get money out of a C entity down to the owners without double taxation without
uh being subject to all of the social security FICA FUTA and all that crap
in the S corporation I can get a lot of money to the owners as distributions and that's not subject
to the social security FICA FUTA you save 16% tax right off the top in that case so why would
i choose one or the other of these you're going to choose a partnership taxation if your company
is making money through rents royalties that sort of thing passive income unearned income
and we have other youtubes on what passive and unearned income is if you
have earned income you're selling widgets you're selling goods or services then you're
going to probably want a tax under chapter or sub-chapter s of the IRS code that way i
can get money out through the distribution and i don't have to pay the payroll tax the social
security FICA FUTA and all the rest of that crap
on the money i get out as a distribution so we save 16 plus percent on that not a bad deal guys
pretty good you're going to have a text under Chapter C if the IRS code probably never so lee
phillips talking on how you would choose to have your multiple member LLC taxed under the IRS codes