

IRS: Partners' Share of LLC Income Is Subject to Self-Employment Tax - redtexture
http://www.forbes.com/sites/anthonynitti/2014/09/10/irs-partners-share-of-llc-income-is-subject-to-self-employment-tax/

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gamblor956
This isn't really news. The general consensus among (properly trained) tax
practitioners has long been that partners' distributive shares of the
partnership income are self-employment income and thus are subject to the
various self-employment taxes. What this CCA does is formally clarify the tax
treatment of partners' income from an LLC taxed as a partnership.

Note that LLCs are regarded as partnerships for tax purposes. The fundamental
misunderstanding addressed by the CCA is that LLC members were commonly but
erroneously characterized as limited partners by many practitioners because of
the "limited" nature of their legal liability for the entity's debts. However,
properly-trained practitioners have long understood that for tax purposes,
"limited partner" is generally defined by the limited scope of management and
control they exert over the partnership.

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redtexture
Yet another reason to avoid choosing the partnership tax election for LLCs for
organizing your startup.

