Can one retroactively add member to LLC?
I currently have a single member LLC. If I add spouse now, can I split all of the income we have had prior to her being added as a member/owner 50/50 i.e. income from January until now?
Probably not, but you could pay yourself less for the rest of the year to make up for it, then change the percentages for 2018. It’s all fungible, right?
Probably not, but you could pay yourself less for the rest of the year to make up for it, then change the percentages for 2018. It’s all fungible, right?
Can one retroactively add member to LLC?
I currently have a single member LLC. If I add spouse now, can I split all of the income we have had prior to her being added as a member/owner 50/50 i.e. income from January until now?
Well, ahem, it depends on what your Articles of Organization say. Those details can be very easy to overlook.
Probably not, but you could pay yourself less for the rest of the year to make up for it, then change the percentages for 2018. It’s all fungible, right?
Unless @rambo is planning to put the spouse on payroll, this would not solve the problem as all profits from the LLC flow through to the owner(s), whether or not distributed (as guaranteed payments or otherwise).
This is one reason I only change my business structure on Jan 1. Less hassle.
I’m not sure if my solution solves Rambo’s problem or not as he hasn’t exactly explained the problem. But you can certainly change your % of ownership and thus your % of distributions to something other than 50/50 and you can do it multiple times, but probably only once per tax year.
Can one retroactively add member to LLC?
I currently have a single member LLC. If I add spouse now, can I split all of the income we have had prior to her being added as a member/owner 50/50 i.e. income from January until now?
Well, ahem, it depends on what your Articles of Organization say. Those details can be very easy to overlook.
Probably not, but you could pay yourself less for the rest of the year to make up for it, then change the percentages for 2018. It’s all fungible, right?
Unless @rambo is planning to put the spouse on payroll, this would not solve the problem as all profits from the LLC flow through to the owner(s), whether or not distributed (as guaranteed payments or otherwise).
Articles of organization ah of course – they say I of course can, but the monies prior were paid to me and spouse as sole proprietors – not sure I can now just change that over to partnership income.
What WCI recommends seems reasonable. Let’s assume our projected income 1099 is 500K. I make 200K Jan-June 1099 and spouse made 50K 1099 sole prop income in the same period. For the second half of the year (assuming partnership will bring in another 250K), I can elect spouse to get 90% profit from the combined partnership income, so now spouse gets 225K allocated pus the initial 50K as sole prop so total 275K for spouse and 275K for me. This would allow for optimal contributions into a solo 401k.
For year 2018, we can just go 50/50.
Correct?
Can one retroactively add member to LLC?
I currently have a single member LLC. If I add spouse now, can I split all of the income we have had prior to her being added as a member/owner 50/50 i.e. income from January until now?
Well, ahem, it depends on what your Articles of Organization say. Those details can be very easy to overlook.
Probably not, but you could pay yourself less for the rest of the year to make up for it, then change the percentages for 2018. It’s all fungible, right?
Unless @rambo is planning to put the spouse on payroll, this would not solve the problem as all profits from the LLC flow through to the owner(s), whether or not distributed (as guaranteed payments or otherwise).
Articles of organization ah of course – they say I of course can, but the monies prior were paid to me and spouse as sole proprietors – not sure I can now just change that over to partnership income.
What WCI recommends seems reasonable. Let’s assume our projected income 1099 is 500K. I make 200K Jan-June 1099 and spouse made 50K 1099 sole prop income in the same period. For the second half of the year (assuming partnership will bring in another 250K), I can elect spouse to get 90% profit from the combined partnership income, so now spouse gets 225K allocated pus the initial 50K as sole prop so total 275K for spouse and 275K for me. This would allow for optimal contributions into a solo 401k.
For year 2018, we can just go 50/50.
Correct?
Yes, you can do that. One of the beauties of partnerships is their incredible flexibility. The disadvantage of bringing your spouse on as a partner is that, if spouse is not already maxing out SS in another job, spouse will have to pay SS on the firs $127,200 of earnings. You need to weigh that against the benefit of contributing to a 2nd SOLO-k account if that is your reason for adding spouse as a partner.
Spouse is maxing SS so that is good for now. Would splitting income as above have any bearing on how we contribute to solo 401k? Just want to make sure not missing anything that I overlooked.
Spouse is maxing SS so that is good for now. Would splitting income as above have any bearing on how we contribute to solo 401k? Just want to make sure not missing anything that I overlooked.
It would if one of you ends up with >$270k of earned income and the other reports <$270k earned income. Actually, per your above example as you are making $275k. That extra $5k should go to your spouse. Partnership agreement can have wording to that effect.
If I am not mistaken, my income for the year would be $250K plus $27K = $277K and spouse income would be $20K plus $243K = $263K. We can then each do about ~20% profit sharing from the above.
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