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Owners of my LLC partnership would be working directly on a Ph I SBIR/STTR grant at a certain rate/hr for certain hours/week. LLCP can issue invoices to the grant agency for the hours worked by owners and accordingly withdraw money from the grant account. However, an LLCP cannot pay salary (in the form of W2 or 1099) to its owners. What would be the best way then for the owners to withdraw funds from LLCP corresponding to the hours they spent working on the grant and for the general business of the LLCP? Would that form of payment e.g. owner’s draft by LLC to its owners be acceptable to the grant agency or the agency would like to see W2 issued to the owners? Thanks
Owner’s Draws are appropriate for booking “salary” payments to owners of an LLC partnership. However, as you proceed into a Phase II award, the government prefers a corporation status (S-corp or C-corp) with payroll (W-2) payments to owner/employees. This is something you may want to consider for the future.
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