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April 2, 2025
Question

Do i have to have guaranteed payments or can I just have distributions when I don't have payroll set up?

  • April 2, 2025
  • 1 reply
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    April 2, 2025

    You are not required to have guaranteed payments for a partnership.  Guaranteed payments are those made by a partnership to a partner that are determined without regard to the partnership's income. A partnership treats guaranteed payments for services, or for the use of capital, as if they were made to a person who is not a partner. This treatment is for purposes of determining gross income and deductible business expenses only. For other tax purposes, guaranteed payments are treated as a partner's distributive share of ordinary income. Guaranteed payments are not subject to income tax withholding.

     

    If you have an SCorp, you cannot take distributions in lieu of W2 income.