Correct way to invest in LLC & Paying LLC partner

[B4works]

Hello,

I am starting a new LLC with 2 members (me & my wife). I wanted to ask what's the correct way to do initial investment in there should I deposit directly from my personal account? Also me and my wife will be partners in this new company but I will be the one investing money and she will be the one working. At least for six months I don't believe we will  be making any money because there is so much work that needs to be done. I have a full time job and have some extra income so I want to invest the extra savings into LLC and compensate her for the work she is doing. What would be the correct way to achieve this? Also will it better to setup a C or S-Corp then setting up an LLC?

Any recommendations will be very helpful.

Thank you.

[Anonymous_]

You need to consult with a tax professional (and most likely) local legal counsel.

An LLC defaults to a partnership unless an election to be treated as a corporation is made for federal income tax purposes. If it is in the operating agreement, your wife could receive what is called a "guaranteed payment".

For the purposes of this board, you might want to disclose the nature of the business and in which state you reside, among a few other details concerning future plans for the entity.

I will page another member for more input, but you should seek this type of advice from a local professional who can evaluate your situation in depth.

@Rick19744 

[rjs]

If you live in a community property state there is another option for an LLC when the only members are spouses. Instead of treating it as a partnership or a corporation, you can treat it as a disregarded entity. But as tagteam said, get local professional advice.

[Anonymous_]

I agree with rjs; married taxpayers who reside in a community property state and are the only members of an LLC can treat that LLC as a disregarded entity. However, the same does not apply to corporations which must be treated as separate entities.

[Rick19744]

This question is really too broad based to provide assistance in a forum such as this:

• You need to have a one on one with a tax professional where you can discuss the business, the economics, the goals, the activity level of the member's, etc.
• All entities have pros and cons
• Your state of residency can come into play (community property state)
• You need to consider earnings, fringe benefits, etc
• While you may be married filing joint, long-term impact needs to be considered for each spouse
• Any entity requires a separate bank account, credit card, etc.  Don't commingle funds
• Make sure you understand the accounting and payroll that will be required
• Spend the $$ now to get the entity started that will meet your goals; and doesn't run afoul of any tax problems.