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The best/correct way for a Multi-Member LLC to pay our own children who work for us.

We have a multi-member (partnership) llc with 3 equal partners. We do not provide w-2's. If someone works for us we give them a 1099-NEC.  Is the same true if our children work for us, do we provide them with a 1099-NEC? Also it says a dependent child has to claim more than $400 in 1099-NEC compensation---but for businesses it says not to provide a 1099-NEC until an independent contractor makes more than $600 for your business---why the discrepancy between those 2 amounts? So say my child works for my business as mentioned above and made $3k in 2023.  I provide them when a 1099-NEC Correct?

 

Also then what is recommended should they file they own taxes and select they can be claimed by someone else---or do I enter their income from their 1099-NEC on my own individual 1040 and fill out another form...which is the better option.  Also how much can they make on a 1099-NEC before having to pay taxes.

Thank you!

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3 Replies

The best/correct way for a Multi-Member LLC to pay our own children who work for us.

Self employment income over $400 is subject to 15.3% self employment tax. If you gave him a W-2 for 3K he would have no filing requirement and you would not have to pay payroll tax so that would be a better option for you. 

The best/correct way for a Multi-Member LLC to pay our own children who work for us.

Can I provide W-2's if we are not a corporation? and if we do not have employee's?

The best/correct way for a Multi-Member LLC to pay our own children who work for us.

Well, you do have an employee if you hired your son to do actual work which a requirement if the LLC is deducting his pay. You can hire employees as well as independent contractors. Since your son doesn’t have a business and works at your direction and not independently, he is more accurately classified as an employee. 

Off topic, but his pay would qualify for him to have a Roth IRA if you wanted to set that up for him. 

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