USA LLC Guaranteed Payments

[Jason Taylor]

I have a multi member LLC with 3 partners. We currently pay ourselves through guaranteed payments and draws. Is it more beneficial for the individual to receive more guaranteed payments (subject to SE Tax) or more draws (subject to more passthrough income from their K1? Thanks!!

 

[kirby]

What Are Guaranteed Payments? | A Guide For Entrepreneurs

Are you a business owner scratching your head at guaranteed payments? Here's some insight into when you should start making these payments.

acuity.co

 

[stevuke79]

Guaranteed payments to partners are not subject to QBID/199A deduction. So from a tax planning perspective it might be beneficial to limit your guaranteed payments and take some regular distributions in addition to the guaranteed payments.

However, if active, net ordinary business income on the K1 is subject to SE tax the same as guaranteed payments for services. The only things not subject to SE tax is passive or rental income or guaranteed payments for capital. But if it's guaranteed payments for services versus net business income, the only difference is QBID.