Multimember LLC (partnership)--how to pay your children

[RN_Dena]

My husband has a multimember LLC with 2 other members (3 total).  They hope to have a few of our/their kids work with them during the summer to help out and earn money.  Since it is a multimember LLC and not a sole proprietorship how do they need to report earnings our kids work for them.  Each member have their own possible child who may work with them---but they are not the children of all members.  

How is this income reported to the IRS from both the business/child/parent.

Thank you,

[Bsch4477 · Accepted solution]

The partnership has to function like a business and has to agree on what work is required and the cost to the partnership. The fact that some partner’s’ kids are earning money and others are not should not be an issue if there’s agreement on those issues. I assume that you each get a K-1 to report income and expenses for the partnership so the cost of the employees would be reflected there. The children would get a W-2 like any other employee and report that income on their own returns making sure that on their returns they check the box saying that someone else can claim them. As an aside, the child can start a Roth IRA to the extent of their income. 

[RN_Dena]

Can a multimember LLC recognized as a partnership and not an s-corp provide workers with w-2's.  I thought they had to be paid as non-employees on 1099-NEC's?

[ThomasM125]

A partnership can and should pay wages to employees and report them on a W-2 form just like any other business. They are reported on line 9 of the partnership Form 1065:

You may be thinking of the taxable income of the members of the partnership, which is typically reported on the schedule k-1 of the partnership. Form 1099-NEC is used to report compensation paid to independent contractors who perform services for the partnership. They are different from employees in that they operate their own independent businesses.