Legal Question in Real Estate Law in Georgia
Limited Liability Company
My husband, family and friends are going to invest in some land with an real estate investment co. Each investor will contribute a varied amount, (ex. 1/2 unit; 1 unit; etc)Instead of each person paying the investment co. individually, they will set up an LLC and pay one lump sum. In this case, is one person (manager)liable for self employment tax?
Nolo website states ''The current rule is that any owner who works in or helps manage the business must pay this tax on his or her distributive share (rightful share of profits). However, owners who are not active in the LLC -- that is, those who have merely invested money but don't provide services or make management decisions for the LLC -- may be exempt from paying self-employment taxes on their share of profits.
I think this applys to a normal business LLC, such as a store. I don't think this applys to us but I don't know how to explain this to my brother in law.
3 Answers from Attorneys
Re: Limited Liability Company
That can be a complicated tax question for a CPA or tax attorney, but generally, all owners are responsible to pay self-employment tax on distributions. However, if the LLC elects sub-S status, money is paid out as a salary.
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The foregoing is general information only, not specific legal advice. No attorney/client relation has been created or should be implied.
Re: Limited Liability Company
Neither this forum nor nolo.com are substitute for the advice of a CPA or lawyer. We especially can't tell you how to explain something to someone else. It would be very negligent to enter into this business venture without having everything properly spelled out in the beginning. This is especially true with friends and family. Paying for a lawyer and CPA in the beginning may save much more money and relationships later on.
Re: Limited Liability Company
Consider safe-guarding the security of your investment and relationships by investing in an attorney, CPA and perhaps a financial advisor.
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