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Are guaranteed payments to LLC partners wages under the PPP?

CaliforniaConstruction Accounting Coronavirus

We are a small limited liability company with only two members (partners). We do not have any employees. We pay ourselves, of course, but we pay ourselves with "guaranteed payments," as opposed to standard W2 wages. We are looking at the PPP Act (CARES Act). Do our guaranteed payments qualify as "paychecks" under the new law? Also, we pay distributions to ourselves from time-to-time. Would these qualify?

2 replies

Apr 21, 2020

Thank you for your question! Under the CARES Act, approved payroll costs are broken into two parts. 1. “compensation with respect to employees” 2. “sum of payments of any compensation to or income of a sole proprietor or independent contractor that is a wage, commission, income, net earnings from self-employment.” Payments to members through guaranteed payments or distributions do not qualify as employee compensation under part 1. The LLC would not be able to use these payments as qualifying payroll. Therefore, the members would need to apply individually under part 2.

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May 3, 2020

You need to update your comments guaranteed payments are now considered part of payroll costs

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