Accounting & Bookkeeping & Small Business Forum

[Tom Smith]

Can partners in the company be on payroll? The Company that I am dealing with is a Partnership for tax purposes, not an S-Corp.

[Richard Noot]

partners are NOT employees. Even so-called guaranteed payments are NOT
wages.

[BillBro]

The typical function of "payroll" is to compensate employees for wages or salary earned, and to deduct withholding for State and Federal income tax, Social Security, Medicare, etc. Not only are partners not employees, but they are responsible for all their own withholding as part of the Self-Employment tax. There is no function served by payroll, as it is generally defined, in their case.

Even "guaranteed payments" for services rendered to the partnership are subject to SE tax on each partner's individual return, hence no withholding, hence no payroll function.

[cdiii3]

The decision whether to have partners etc. on a formal payroll also has implications regarding federal and state unemployment taxes.