A limited liability company can have employees. LLCs need to follow the rules for having a staff, such as paying at least minimum wage and offering employee benefits to full-time employees. It’s important to note that most LLC members can’t be employees of the LLC if they’re not filing taxes as a corporation. (Owners of an LLC are referred to as “members.”)
It’s completely possible for a single-member LLC to have employees. In fact, many LLCs run their business with employees. Even if you don’t want to hire full-time employees there are still lots of other options, such as independent contractors.
If you choose to use independent contractors, you won’t have to worry about withholding taxes or providing them with benefits. However, you will need to issue them a 1099 form. Independent contractors can be a great way to get specialized support without having the individual be your employee.
Before you can hire anyone for your LLC, you’ll need to apply for an employer identification number (EIN). This number is from the IRS and acknowledges that your business can legally hire employees. Getting an employer identification number is free, and the application process should only take a few minutes.
Hiring employees for an LLC is similar to most other businesses. There are a few things you’ll need to learn about a possible employee, especially for tax purposes. When hiring somebody, make sure that they’re legally authorized to work in the U.S. and that they have (or can get) a Social Security number. You’ll need to have clear guidelines for employee wages, and it’s always a good idea to have an employee handbook.
Once an employee has officially been hired, the LLC has 20 days to report that information to the state. Another thing that you’ll need to do is purchase workers’ compensation insurance. Your business will also need to have all required labor law posters with an explanation of rights posted throughout the workplace.
You’ll need to research all federal and state labor laws applicable to your industry and location.
It’s essential for business owners to pay employee wages in a timely and reliable manner. Payroll can be stressful, but there are great options you can consider to take this aspect of running a business on your plate (more on that later).
When it comes to paying employees, it’s important to think about payroll taxes. Make sure that you’re setting aside the correct amount each time an employee is paid. When you’re figuring out payroll taxes, it’s essential to keep a record and have clear paperwork.
Filing taxes is something that many people wonder about when starting an LLC.
By default, an LLC has the benefit of pass-through taxation, which means the business itself doesn’t need to pay federal income taxes. The LLC’s profits will only be federally taxed on the personal tax returns of the owners. The business itself would only pay federal income taxes if it elects to be taxed as a C corporation.
The employees of an LLC will pay taxes and have withholding taxes just like employees of other business entities. However, the LLC owners themselves aren’t allowed to be paid as employees themselves. They’re compensated by receiving their share of the LLC’s profits. Learn more about how to pay yourself from an LLC.
There’s an exception to the rule about LLC owners being able to be employees of the company. If the LLC elects to be taxed as an S corporation or C corporation, the LLC owners can be “owner-employees” of the company and receive a salary in addition to their share of the profits. Some LLCs file as a corporation because this allows them to pay employment taxes (the taxes earmarked for Social Security and Medicare) only on their salary and not their share of the profits. Learn more on our S corporation page.
Some business owners don’t know that LLCs are required to keep their employee tax records for a minimum of four years. It’s important to keep your records so that you have answers if any questions ever arise.
It’s no secret that accounting can be stressful. If you want help organizing your finances for tax time, consider using ZenBusiness Money. When you choose ZenBusiness Money, you can keep all your business expenses in one place. If you prioritize staying organized, this is the right option for your business.
Our services are the perfect option for individuals who want to ensure their LLC is formed properly and has the tools it needs to run and grow. Whether you’re new to starting businesses or you’re an expert, it’s always great to have extra support.
Disclaimer: The content on this page is for informational purposes only, and does not constitute legal, tax, or accounting advice. If you have specific questions about any of these topics, seek the counsel of a licensed professional.
It’s possible for a member of an LLC to also be an employee, but only if the LLC first applies to be taxed as a corporation.
If you’re going to receive a salary from your LLC, you’ll need to file as a corporation.
If your LLC successfully applies with the IRS to be taxed as a corporation, then a member acting as an employee of the LLC can receive a W-2. They’ll also need to have the necessary taxes withheld from their paychecks.
There’s no restriction on the number of employees in an LLC, but if you’re the owner of the LLC, you must first apply to be taxed as a corporation by the IRS before you can be employed by the company.
If you’re an LLC member, then you typically won’t be receiving a salary. Instead, you’ll most likely be getting a percentage of the business profits that aligns with your amount of ownership. If you want to receive a salary, your LLC will need to apply to the IRS to be taxed as a corporation.
Start an LLC in Your State
When it comes to compliance, costs, and other factors, these are popular states for forming an LLC.
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