LLC partnership and SBA Covid money

[bert79]

My dad and I operate our wash as a partnership LLC with no employees. I understand that all the SBA Covid money has dried up for now. Hoping there will be more in the future. Before it dried up I was told that we didnt qualify for any money because we dont have any employees. I'm curious if anyone else out there operates like we do and was able to receive any assistance from the Feds or anywhere else?

 

[Waxman]

There are 2 loans; a PPP loan ( for payroll expenses) and a disaster relief loan. Go to the SBA.GOV website and look there. I think you want the latter loan.

FWIW; why not put yourselves on payroll? I'm incorporated and an employee of the company. Works well for me and my pay is included in the calculations for the PPP loan.

I applied for the PPP loan and the funds ran dry. The bank I used is processing the application in hopes the funds will be replenished.

 

[bert79]

Thank you Waxman. I am aware of the two different programs and both seem to require a payroll to qualify. Like you pointed out we are not on the payroll as employees. We simply take distributions from the LLC. As far as our accountant has explained it to us that offers us more advantages as far as making changes to our pay structure as we see fit. You may know more about the different structures than I. Beside being able to qualify for these new Covid programs what other benefits have you seen with classifying yourself as an employee? If it has a benefit longterm I would be interested in doing that. I'm not sure if doing it now would offer much benefit as far as the covid relief programs go, but of course I may be wrong.

 

[washnvac]

I have an LLC in one state, and an S corporation in another. On the LLC, like bert, I take draws. Apparently a partner in an LLC is not supposed to take regular pay checks. (so my accountant says). I do take a regular on the corporation. And I take a "guaranteed draw" on the LLC. So the LLC is not eligible for the PPP with no other employees.

 

[Sequoia]

Thank you Waxman. I am aware of the two different programs and both seem to require a payroll to qualify. Like you pointed out we are not on the payroll as employees. We simply take distributions from the LLC. As far as our accountant has explained it to us that offers us more advantages as far as making changes to our pay structure as we see fit. You may know more about the different structures than I. Beside being able to qualify for these new Covid programs what other benefits have you seen with classifying yourself as an employee? If it has a benefit longterm I would be interested in doing that. I'm not sure if doing it now would offer much benefit as far as the covid relief programs go, but of course I may be wrong.

I would never add the complexity and taxation to make yourself an employee. Then you also get into reporting and maybe workmen comp insurance. Look into "guaranteed payments" with a LLC.

 

[washnvac]

. Then you also get into reporting and maybe workmen comp insurance.

In Delaware, I can exempt myself from Work Comp--which I do. I am subject to unemployment insurance up first $8500. That amounts to less than $100 though.

 

[Ayerule]

Understand the tax breaks, and this is slightly off topic (my apologies), but I would make note of the liability.

Wouldn't someone be able to sue you directly with an LLC?

I put the property under it's own S-Corp. The car wash in another S-Corp and any other business on the property in their own S-Corp. To my understanding, if someone tries to sue one of the companies (such as the carwash), they can't touch the property, me personally or any of the other companies. If they won, I'd just start another and move on with minimal loss.

With all these S-Corps (pass through for taxes), everything is a write off. Living expenses are included and you get draws.
Maybe it varies by state, but here in Florida I don't need to offer employee benefits or health insurance as I'm too small.

Since living expenses were through one company, that is the one filed for SBA PPP.

As I'm thinking and writing this, maybe have just the property under an S-Corp and the running business as an LLC would work. All the car wash equipment is considered real estate and the LLC would just manage the day to day operations.

Corporations also have shares which ensure ownership. Helps a lot if you need to create a trust which avoids probate.

 

[Kramerwv]

You can get a ppp loan as a sole proprietor or partnership. It’s too lengthy to add here but search the term interim final guidance for ppp and you can find out more.

 

[Dan-Ark]

It seems when the PPP came out they made a big deal that self employed people were eligible. They have probably back peddled on that like they underfunded the program in the beginning. someone posted earlier that ruths chris steak house got 20 mil. I would have thought they ahd over 500 employees. Perhaps it was a different program? wonder how the banks that got their customers approved managed to do that. I had applied the first day the sba had opened for applications.

 

[Sequoia]

With all these S-Corps (pass through for taxes), everything is a write off. Living expenses are included and you get draws.

Do you have a CPA? I've never heard of writing off living expenses against a business LLC or S-corp. I've had both.

 

[soapy]

i pay workmans comp. on myself. It runs about $400 per year and figures a owners wage at around $16K. It is much cheaper than Health insurance and the deductible if you do get hurt. I have only used it once in 25 years but I think it is a good deal for peace of mind.

 

[Earl Weiss]

Wouldn't someone be able to sue you directly with an LLC?

I put the property under it's own S-Corp. The car wash in another S-Corp and any other business on the property in their own S-Corp. To my understanding, if someone tries to sue one of the companies (such as the carwash), they can't touch the property, me personally or any of the other companies. If they won, I'd just start another and move on with minimal loss.

With all these S-Corps (pass through for taxes), everything is a write off. Living expenses are included and you get draws.

Corporations also have shares which ensure ownership. Helps a lot if you need to create a trust which avoids probate.

Lots of stuff abpve needs to be vetted with a lawyer and CPA well versed in Federal and State Tax laws and other stuff.

1. LLCs and Corps offer same liability protections if properly run. If not a claimant can seek to "Pierce the Veil" and go after the LLC "Managers / Members" or corp shareholders and officers. Some other liabilities flow thru to the owner as well.
2. Typically real estate is owned by LLCs because certain tax laws do not allow Real Estate Losses to flow thru to S corp shareholder but they can flow thru to LLC members.
3. Small business can be organized as an LLC or S corp various advantages to either vis a vis tax filing requirements and having yourself as an employee. Only a CPA with your complete asset picture could properly advise you as to what is best for your situation.
4. Living expenses are not deductible expenses unless needed for the business such as vehicle usage.
5. Probate avoidance can be done with either Corps or LLC if the ownership (Stock / membership interest) is held by a trust. If you own the share / interest solely in your own name and your assets exceed the state threshold they will need to be part of the probate process which my or may not be a big deal.

 

[Waxman]

You also pay into social security on a regular basis as an employee so you get that when you are old enough to collect it. Since I've been doing this most of my adult life, I need to be paying into SS!

Plus a Corp has many other benefits.

I've gotten plenty of bogus advice from CPA's over the years. I did my own research on Incorporating the business and used a lawyer to complete the process. My CPA likes it just fine...

 

[Ayerule]

Do you have a CPA? I've never heard of writing off living expenses against a business LLC or S-corp. I've had both.

My CPA was the one who set it up, now I'm nervous!!


Feels like I gave poor/incorrect advice, not the intention at all. Hopefully others can learn from my mistakes or changes.

Mr. Weiss and Waxman are correct, I should run this through a separate lawyer. Lots of new doubt since I used a lawyer my CPA recommended. Maybe my best interests weren't considered.

I'll start a new thread after revision/restructure. The bomb I haven't dropped: family is involved which is horrible and I wouldn't wish upon anyone.

 

[wyatt]

I used to work as a CPA before buying car washes... THE best route for most small business is an LLC taxed as an S Corp.