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Ask The Experts: HRA for LLC

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Q: I am a majority owner of a new multi-member limited liability company. My wife is the other member and is a minority owner.

We want my wife to be eligible for health care expense reimbursements from a health reimbursement arrangement. Is there a minimum number of hours per week she must work as a part-time employee of the LLC to qualify under the HRA? What are your recommendations in regard to documentation of these hours?

Let's go back a step and make sure we are on the same page with your HRA.

Only bona fide employees are eligible for reimbursements under an HRA.

If your wife is an owner or member in the multi-member LLC, then she is not a bona fide employee and cannot participate in the HRA.

Further, an owner of your LLC would not be compensated as a part-time employee, so there would be no minimum or maximum work hours at issue.

Now back to your practical questions. If you adopted the HRA to cover your family’s medical expenses, then your wife needs to be a bona fide employee of the LLC, and you need to be the only owner of the LLC.

Regarding work hours and wages, the wages that you pay your employees need only be reasonable in connection with the services that they provide. If the sole reason for this employee/employer relationship is the HRA, then there is no minimum or maximum work hours required.

Simply documenting the actual hours your wife works will suffice. It is a great idea to keep actual time cards just like you would require of an unrelated third-party employee.

Just be reasonable and diligent. Those are the only real requirements.

Remember that as an NASE Member, you have access to a health reimbursement arrangement through NASE HRA 105. Your HRA can be customized to your specific needs, adding maximum flexibility to your business, while saving significant tax dollars.

To learn more about the NASE HRA 105, check out this free online webinar.

Get More Answers

The NASE’s small-business experts are here to help you understand the ins and outs of operating a successful small business. And access to these professionals is free with your NASE Membership!

Just go online to the NASE’s Business Learning Center where you can ask the experts questions about:

  • Taxes
  • Health care expenses
  • Financial issues
  • Employee relations
  • Accounting rules
  • And much more

The experts are available 24/7 and ready to help!

Read this article in PDF form here.

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