Can I hire myself as a contractor for my own LLC?

[tsouroukoria]

I am a shareholder of a multimember LLC. Can I offer management services in my name to the LLC and invoice them as contract labor?

Thanks!

[Opus 17]

There is no tax reason why a multimember LLC could not engage you as a subcontractor.  Your LLC income is reported on a 1065 and K-1, and the subcontractor income would be on a schedule C as part of your personal tax return.

The question should be directed to the other members of the LLC and your (hopefully written) partnership agreement.  You would be shifting part of the income exclusively to yourself.  Is that a conflict of interest?  Is it allowed by the partnership agreement?  Would your partners approve?  If you have a partnership agreement, what did you each bring to the table, and why are these particular skills or tasks not part of your participation under the agreement, why are they something extra?

I don't think the IRS will care as long as you pay your taxes.  But your other partners might have an interest in the matter. 

[Mike9241]

by the way is this an LLC with an S-Corp election. I ask because you say you're a shareholder. In this case, I would think if the other owners agreed, you could get paid for your services. However, I think it would have to be a w-2 since you would be an employee of the corp.  By the way as an S-corp, all owners who are active in its operations are supposed to receive a salary. 

the downside is that w-2 wages don't qualify as QBI. If paid as an IC, I don't know if the IRS would object. if it does and it's sustained, the S-corp would be subject to substantial penalties 

[M-MTax]

Check out guaranteed payments

@tsouroukoria 

[Opus 17]

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@Mike9241 wrote:

by the way is this an LLC with an S-Corp election. I ask because you say you're a shareholder. In this case, I would think if the other owners agreed, you could get paid for your services.

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Well, absolutely.  If this was an S-corp (or made an election as an S-corp) then anyone who participates materially in the business (and is not just a passive investor) must be paid a fair market salary for the work they do, which is subject to all normal employee rules and is reported on a W-2.  If one shareholder does more work, they should be paid more.   Then the remaining profits are distributed to the shareholders. 

[M-MTax]

     Not really true. Plenty of friends and relatives of small businesses.....S corps.....donate their time to help out the principal shareholders. They don't have to be compensated.....it's not required.

     If the person has been hired as an employee, then there are laws in effect.....wage and hour.....but that's about it. The IRS doesn't really care if someone wants to volunteer their time unless they're a shareholder or employee of the corp.

[Opus 17]

@M-MTax 

That's an interesting nitpick, but its not on point here because the taxpayer is a shareholder.

Of course, anyone (not a shareholder) can volunteer for free to work for any business.  Why anyone would want to work for a profit-making company and not share in the profits via wages is up to them, I guess.  

[M-MTax]

Why anyone would want to work for a profit-making company and not share in the profits via wages is up to them, I guess.  

I see it in practice. Mostly moms and grandmas.....and other close family members.......who volunteer to help out with startups and struggling businesses. I mean, does Intuit pay you to answer questions here?