Is the Owner of an LLC Considered an Employee?

Can LLC Owners be Employees?

• An LLC’s owners cannot be employees.
• A single-member LLC’s owner is a sole proprietor.
• Multi-member LLC owners are like partners.

Self-Employment and LLCs

• Business owners are self-employed.
• Sole proprietors, partners, and independent contractors are self-employed.
• Self-employed people can get PPP loans, EIDL loans, and unemployment aid.
• Self-employed people qualify for SBA loans.
• LLC members getting LLC payments is employment income.
• States treat LLC members as employees differently.
• Members as employees changes taxes.
• No one can be an LLC member and employee federally.

Taxation and LLCs

• Most LLCs are taxed like partnerships.
• Income passes through.
• An LLC can choose corporate taxation.
• Profits are taxed at the corporate rate.

Are LLC Partners Considered Employees?

• Partners in a partnership (including certain members of a limited liability company (LLC)) are considered to be self-employed, not employees, when performing services for the partnership.
• For an LLC member providing services to the corporation in return for payment, that income will be considered employment income, which must be reported to the IRS.
• Partners are viewed as self-employed individuals, responsible for their own taxes and social security contributions, subject to different tax rules compared to employees.