Marcum 2021 Year-End Tax Guide

Establish Multiple Ownership Classes Yet another alternative is to form an LLC with multiple ownership classes. The proposed regulations include an exception for LLCs that have certain multi-class ownership structures. For example, consider a two class structure where Class A interests are issued to all members (i.e., managing and non-managing), and Class B interests are issued only to those managing-members providing services and receiving guaranteed payments. To qualify for the limited partner exception, other non-managing Class A members must own a substantial, continuing interest (20% or more) in that class and must have identical rights and obligations relative to that class. This alternative could provide a member the opportunity to own both Class A and B interests, with only the distributive share of income from the Class B interest, plus any guaranteed payments, being subject to self-employment taxes. Often overlooked at the time of entity formation, self-employment tax is a substantial area to consider when creating and structuring an entity. While the above provides a few structuring alternatives to consider, this is not an exhaustive list of options. Consult your Marcum tax professional to explore all options available based on your unique facts and circumstances. MARCUM RECOMMENDATION Often overlooked at the time of entity formation, self-employment tax is a substantial area to consider when creating and structuring an entity. While the above provides a few structuring alternatives to consider, this is not an exhaustive list of options. Consult your Marcum tax professional to explore all options available based on your unique facts and circumstances.

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