Can a Spouse Work for an LLC for No Pay?

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Limited Liability Companies are state-governed entities that have a range of tax and legal benefits in their business structure. Similar to a sole proprietorship, LLC owners enjoy a flexible style of management. Owners can elect to operate with or without employees. Family members and spouses also are able to work for your LLC, but certain taxation do rules apply.

Employer Identification Number

  • LLC owners who plan to have employees must obtain an Employer Identification Number from the Internal Revenue Service. EIN numbers can be requested by phone, mail or online. LLC owners must answer a series of questions regarding the type of employees they plan to hire. These questions are unrelated to familial status, but rather help the IRS determine your tax classification.

Salaries

  • Typically, employee salaries are budgeted when the LLC is formed or at the start of the tax year. If your spouse is not receiving a salary because the business has not met projected revenue goals, this does not mean he or she is not an employee, but it does mean that an employee classification is essential. Workers must be categorized as one of the following: an independent contractor, common-law employee, statutory employee or statutory nonemployee.

Hiring an Employee

  • When your spouse is “hired,” he or she cannot be considered a statutory nonemployee or common-law employee. Based on regulations set forth by the U.S. Department of Labor, both statutory nonemployees and common-law employees must make minimum wage. As of 2011, minimum wage is $5.15 per hour. Minimum wage is the lowest you can legally pay an employee. Consider choosing an independent contractor classification for your spouse to avoid legal woes. Independent contractors can be paid on flexible terms per your employment agreement.

Ownership

  • Another way to simplify the process of having a spouse work for your LLC with no pay is to make your spouse a member of the LLC. LLC owners are called members and members can also be employees. Each member participates in the profits and losses of the business. Compensation terms can be changed as the LLC grows. When the LLC has no revenue, members are not required to get a salary.

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