Thanks for the replies. As a follow up, you mention that by paying my spouse only the 50% distribution share and no salary (because no material participation) I might be scrutinized by the IRS and be asked to characterize part of the distribution as salary, but since the spouse is not an employee I want to avoid that. I'm wondering if it would be easier to change the ownership of the LLC (taxed as S-Corp) and just make myself 99% owner. If my spouse was 1% owner, would the IRS be questioning why there was no salary? The only reason we set it up as a multi-member LLC in the first place was for perceived better legal protection in Florida.
