New LLC Partnership

ForrestG — Tue, 24 Feb 2026 07:04:08 GMT

My wife and I just started an LLC as partners. She is also a full time employee at another company. We are looking for advice about selecting to tax as an S-Corp vs a partnership?

Also, are there rules about how much revenue has to be classified as salary vs distributions?

Re: New LLC Partnership

Cindy4 — Wed, 30 Aug 2023 17:47:44 GMT

Hi @ForrestG !

Congratulations on your business venture! The compensation for S-corporation shareholders typically should be "reasonable" for the services they perform. It should be comparative to other industry businesses paying employees for the same type of services. Here is a resource from the IRS regarding S-corporation compensation:

https://www.irs.gov/businesses/small-businesses-self-employed/s-corporation-employees-shareholders-and-corporate-officers

The taxation of S-corps and partnerships is similar in that they both "pass-through" to the individual level, but there are some marked differences that may or may not be beneficial to you. Here are some resources that may help you decide:

https://www.thetaxadviser.com/issues/2022/oct/10-good-reasons-why-llcs-should-not-elect-s-corporations.html

https://turbotax.intuit.com/tax-tips/small-business-taxes/do-chapter-sub-s-corps-file-personal-tax-returns/L1PiN1exi

https://turbotax.intuit.com/tax-tips/irs-tax-forms/what-is-form-1065/L5UpOREHb

Many people go the S-corporation route so that they can be employees and collect W-2 wages and have the withholding done through payroll so they don't have to calculate estimated tax payments.

Hope this helps!

Cindy

topic New LLC Partnership in Self employed

New LLC Partnership

Re: New LLC Partnership