Announcement

Collapse
No announcement yet.

LLC without employees?

Collapse
This topic is closed.
X
X
  • Filter
  • Time
  • Show
Clear All
new posts

  • #16
    Originally posted by IGDark View Post
    But if a company has no CEO, then who else has the right of signing contracts?
    The owners.
    Senior Professional in Human Resources and Certified Staffing Professional with over 30 years experience. Any advice provided is based upon experience and education, but does not constitute legal advice.

    Comment


    • #17
      Originally posted by ScottB View Post
      The owners.
      And they don't have to be on the payroll to do so, right? So theoretically it's possible for an investor to make occasional business decisions without being on the payroll, isn't it?

      Comment


      • #18
        BSPCPA: You need to consult with a CPA, tax attorney, and/or immigration attorney to review the specifics of your situation.

        ScottB: Didn't I say that?

        Not entirely. I was emphasizing the point that the OP needs to see consult with a CPA and/or tax attorney and adding that he should consult with an immigration attorney as he has F-1 Visa status concerns.

        Scott, given your own advice that the OP consult with a CPA/attorney, I wonder why you are continuing to respond to questions. I am particularly concerned because of all the discussion surrounding the OP and "payroll." As I stated above, single member LLC's are treated as sole proprietorships and multiple member LLC's are treated as partnerships. Absent very specific tax elections to be treated as a corporation, the LLC member(s) would never be on "payroll."

        The OP is clearly trying to grasp on to anything that would suggest he/she is not actively participating in the business - yet he/she openly has stated, "... but I don't want to hire a CEO to do the stuff I believe I can do better."

        To IGDark: Maybe you can structure your business affairs in a way that can satisfy your visa status concerns, but it is not going to be ferretted out in a general discussion forum like this. Sorry for being so blunt - just a word to the wise.
        Barry S. Phillips, CPA
        www.BarryPhillips.com

        IRS Circular 230 Disclosure: This response is intended to provide general information and written for educational purposes only. It does not establish a client relationship. This communication is not intended to be used, and cannot be used, for the purpose of (i) avoiding tax-related penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to any party any matters addressed herein.

        Comment


        • #19
          Originally posted by BSPCPA View Post
          BSPCPA: You need to consult with a CPA, tax attorney, and/or immigration attorney to review the specifics of your situation.

          ScottB: Didn't I say that?

          Not entirely. I was emphasizing the point that the OP needs to see consult with a CPA and/or tax attorney and adding that he should consult with an immigration attorney as he has F-1 Visa status concerns.

          Scott, given your own advice that the OP consult with a CPA/attorney, I wonder why you are continuing to respond to questions. I am particularly concerned because of all the discussion surrounding the OP and "payroll." As I stated above, single member LLC's are treated as sole proprietorships and multiple member LLC's are treated as partnerships. Absent very specific tax elections to be treated as a corporation, the LLC member(s) would never be on "payroll."

          The OP is clearly trying to grasp on to anything that would suggest he/she is not actively participating in the business - yet he/she openly has stated, "... but I don't want to hire a CEO to do the stuff I believe I can do better."

          To IGDark: Maybe you can structure your business affairs in a way that can satisfy your visa status concerns, but it is not going to be ferretted out in a general discussion forum like this. Sorry for being so blunt - just a word to the wise.
          Barry, I need your expert opinion. Say I establish an LLC with a partner, who can only be an investor too. Now, is it poissible for our company to operate without a CEO? If so, then who has the legal right of signing contracts on behalf of the company? Both of us? Neither of us? And if it is possible for a member to sign contracts, then wouldn't he have to be on the payroll in the company?

          Any response would be greatly appreciated

          Comment


          • #20
            Generally, an LLC can be managed either directly by the members or by a manager (or managers). The managers of an LLC are not required to be members. In a manager-managed LLC, the managers are the ones who sign contracts on behalf of the business. The managers can call someone a "CEO" and give him actual authority to execute contracts, but the managers have the ultimate legal responsibility under the state LLC laws.

            If the LLC has more than one member, it is not a "disregarded entity" under the tax laws but rather falls under partnership rules (in the absence of an election to be treated as a corporation).

            You can certainly be a non-manager member in an LLC. Whether that satisfies the rules under your immigration status is something that an immigration attorney must answer.
            David K. Staub (www.illinoisbusinessattorney.com)
            Forum posts are not legal advice, are for informational and educational purposes only, and are not a substitute for proper consultation with legal counsel.

            Comment


            • #21
              Originally posted by dkstaub View Post
              Generally, an LLC can be managed either directly by the members or by a manager (or managers). The managers of an LLC are not required to be members. In a manager-managed LLC, the managers are the ones who sign contracts on behalf of the business. The managers can call someone a "CEO" and give him actual authority to execute contracts, but the managers have the ultimate legal responsibility under the state LLC laws.

              If the LLC has more than one member, it is not a "disregarded entity" under the tax laws but rather falls under partnership rules (in the absence of an election to be treated as a corporation).

              You can certainly be a non-manager member in an LLC. Whether that satisfies the rules under your immigration status is something that an immigration attorney must answer.
              So if an LLC is managed by members, not managers, then they [members] are the ones who have the legal right of signing contracts, higher employees and etc?
              I'm also trying to figure out the difference between an investor and a member of an LLC because it seems for me that these two definitions are inseparable in the context of this particular legal entity. Am I right?

              Comment


              • #22
                Originally posted by IGDark View Post
                So if an LLC is managed by members, not managers, then they [members] are the ones who have the legal right of signing contracts, higher employees and etc?
                I'm also trying to figure out the difference between an investor and a member of an LLC because it seems for me that these two definitions are inseparable in the context of this particular legal entity. Am I right?
                Yes, if an LLC is managed by members, not managers, then the members are the ones who have the legal right to sign contracts, hire employees, etc...

                There is no legal definition of "investor" in the context of an LLC. The members are the owners. I am not sure what distinction you are trying to draw here.
                David K. Staub (www.illinoisbusinessattorney.com)
                Forum posts are not legal advice, are for informational and educational purposes only, and are not a substitute for proper consultation with legal counsel.

                Comment


                • #23
                  Originally posted by dkstaub View Post
                  Yes, if an LLC is managed by members, not managers, then the members are the ones who have the legal right to sign contracts, hire employees, etc...

                  There is no legal definition of "investor" in the context of an LLC. The members are the owners. I am not sure what distinction you are trying to draw here.
                  I've been trying to figure out whether I can register and manage an LLC in the US (California or Delaware) without being "employed." You see, my visa status doesn't allow me to have any income related to employment, but it does allow me to have income from investments such as dividends on stock, interest on savings account and etc. In other words, I can only be a "passive investor." So now I'm trying to find out whether a member of an LLC can ever be defined as a passive investor...

                  Comment


                  • #24
                    LLCs certainly can have passive investors, but that is not the end of your analysis.

                    If you are really earning the income but have someone else fronting the operation for you, I doubt that the INS would consider you as a "passive" investor. Your role should be determined by the substance of the arrangement, not by the form you choose.

                    You really need to focus on the immigration issues. Whether what you plan to do meets the requirements of your immigration status is something only an immigration lawyer with all the facts can answer for you.
                    David K. Staub (www.illinoisbusinessattorney.com)
                    Forum posts are not legal advice, are for informational and educational purposes only, and are not a substitute for proper consultation with legal counsel.

                    Comment


                    • #25
                      Thank you everybody for your responses! It was very nice of you. I am already trying to find a good immigration attorney in the Los Angeles area.

                      I've also hear that a lot of companies specialize on registering businesses in the state of Delaware. Do you think laws are more loyal to immigrants there?

                      Comment


                      • #26
                        1. Investment income and Passive income are two different things (according to the IRS, which is want counts here I believe)
                        2. Passive income can be generated only by a business in which the taxpayer/member does NOT MATERIALLY PARTICIPATE.

                        If a taxpayer materially participates in the activity/company; income is non-passive.

                        To determine material participation in an activity, the taxpayer must meet ONE of the following:

                        1.____ Does taxpayer and/or spouse work more than 500 hours a year in the business?

                        2.____ Does taxpayer do most of the work? Even if taxpayer does not meet 500 hour test, but his participation is the only activity in the business, he materially participates. Example: sole proprietor with no employees.

                        3.____ Does taxpayer work more than l00 hours and no one (including non-owners or employees) works more hours? Example: If owner puts in l75 hours a year and an employee works 190 hours a year, taxpayer would not meet material participation test.

                        4.____ Does taxpayer have several passive activities in which he participates between 100-500 hours each, and the total time is more than 500 hours? The following activities should not be included in the above test: rental activities: activities involving portfolio or investment income, and activities in which the taxpayer does most of the work.

                        5.____ Did taxpayer materially participate in activity for any 5 out of l0 preceding years (need not be consecutive)? Example: taxpayer who retired and his children now run business, but he stills owns part of partnership.

                        6.____ Did taxpayer materially participate in a personal service activity for any 3 prior years (need not be consecutive)? Personal service activity includes fields of health, law, engineering, architecture, accounting, actuarial science, performing arts and consulting.

                        7.____ Do the facts and circumstances indicate taxpayer is materially participating? Test does not apply unless taxpayer worked more than 100 hours a year. Furthermore, it does not apply if:

                        1. any person, other than the taxpayer, received compensation for managing the activity; or,
                        2. if any person spent more hours than taxpayer managing the activity.

                        In my opinion, I would say from your conversations here that you are planning on materially participate in the LLC since you have no other employees. You are not an investor since you are not purchasing or will not own a revenue generating asset.

                        Comment

                        Working...
                        X