Info about the Limited Liability Company & Corporation

After LLC Incorporation, Can I be an Employee of my LLC?

The answer to this depends on how the limited liability company is taxed. If taxed as a partnership/pass through (which is the default taxation for an LLC), owners of an LLC that also work for that limited liability company are generally not seen by the Internal Revenue Services as employees.

Rather, owners are categorized as self employed.  All income earned by the LLC business is seen as self employment income and each member is required to pay and withhold self employment taxes related to that income with the IRS. There is a maximum amount subject to some of the tax.  Now I have never found anything that prevents setting up an employment relationship but many accountants have told me that this has caused issues and resulted in having to unwind it to the self employment structure.  So, check with your accountant on how his or her recommendation as he or she is the person who will be preparing your tax returns and employment tax forms.

If the limited liability company is taxed as a corporation, then owners can be employed by the LLC entity and are treated like employees for all purposes of IRS taxes.

Regardless of tax structure, owners can be paid for their contribution to the LLC and can receive employee type benefits.  However, you should seek the advice of your tax accountant to determine the best way to structure the relationship between a member and the LLC.

A quick side note. There is technically no such thing as llc incorporation.  Unlike corporations, LLCs are organized or formed as opposed to incorporated. The result is the same though.  Each legal entity once created is a separate legal entity with its own powers, characteristics and limited liability. So, just to be precise, instead of llc incorporation you have llc formation.