Payroll question in regard to Disregarded Entity owned by S-Corp Holdco

[Joshua Davidson]

I am looking to setup payroll for myself out of my company, call it LLC #1, and LLC #1 is owned by Parent LLC which I am looking into doing an S-Corp Election for. What I am unsure about is if the whole 60-40 rule around payroll deduction vs owner distributions within an S-Corp can still apply in this situation if the filing entity will only be the S-Corp but the payments are made out of LLC #1, the disregarded entity owned wholly by the S-Corp. I am assuming the treatment would be the same as it is a Disregarded Entity, but I would like a second opinion.

I hope this makes sense. Just looking for some clarity as this is not my area of expertise and Google results are less than optimal. Thanks.

[Michael Plaks]

There is no 60/40 rule outside of TikTok university