Limited liability company (LLC) ownership structures raise complex questions regarding member roles and their potential status as employees. An LLC member, by default, functions as an owner and shares in the company’s profits and losses. However, a member can also be designated as an employee, particularly if they perform specific duties separate from their ownership responsibilities. For instance, a member who manages day-to-day operations or performs specific technical tasks could be classified as both an owner and an employee. This dual status has significant implications for taxation, legal liabilities, and overall business operations.
Distinguishing between an owner’s role and an employee’s role offers several advantages. For the LLC, it clarifies responsibilities and facilitates structured management. It also affects how self-employment and payroll taxes are handled. Furthermore, employee status potentially grants access to benefits such as workers’ compensation, unemployment insurance, and employer-sponsored health plans. This distinction has become increasingly important as LLCs have grown in popularity, offering a flexible business structure that combines the benefits of sole proprietorships and corporations. The evolving regulatory landscape and legal interpretations have shaped how this dual status is understood and implemented.
