I'm confused as to what constitutes passive vs. non-passive income and loss.?
Tuesday, July 6th, 2010 at
2:50 pm
My wife is an employee at an LLC and is also a limited partner. Does her employment at the company constitute material participation?
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She cannot be a limited partner because LLCs do not have partners, they have members. The laws related to passive vs non-passive are quite complex and I recommend speaking with a tax adviser to assess the level of her participation. Employment does not necessarily mean material participation.
She can’t be both an active partner *and* an employee. So the LLC is passive.