Multi-Member LLC - Tax Time

[thirsch76]

Hello Everybody. We are a multi-member LLC, consisting of 3 family members. They are myself, my brother, and his wife. Our business is pretty straightforward. We buy and resell items to the US Military. We do not keep any inventory and only buy what we've already sold. Profit is computed by subtracting expenses (cost of items and freight charges) from the total sale. What's left is the "profit". We leave 10% in the company for incidentals and split what's left 30% - 70%. They are strictly investors and receive the 30%. I do all of the work, Administrative and Sales, and receive 70%. We have been just transferring our cut from the business account into our personal accounts. I label those transactions as Commission in Quickbooks. My idea was then to print 1099's for each of us, so that we could file our taxes at tax time. After looking into doing my taxes, it seems that it's more complicated than that.

- Should we be paying ourselves that way? Nobody earns a wage and money is only distributed based on individual sales.
- With what's left in the account of the 10% that the company has been allocated throughout the year, how do we split that and where do we report that income?
- Do I need to itemize business expenses or can I just report my income and file my taxes that way?

Any help that anybody might give would be greatly appreciated. Thanks in advance for all of your help.

Best Regards,

Todd Hirsch

[Owen]

Hello Everybody. We are a multi-member LLC, consisting of 3 family members. They are myself, my brother, and his wife. Our business is pretty straightforward. We buy and resell items to the US Military. We do not keep any inventory and only buy what we've already sold. Profit is computed by subtracting expenses (cost of items and freight charges) from the total sale. What's left is the "profit". We leave 10% in the company for incidentals and split what's left 30% - 70%. They are strictly investors and receive the 30%. I do all of the work, Administrative and Sales, and receive 70%. We have been just transferring our cut from the business account into our personal accounts. I label those transactions as Commission in Quickbooks. My idea was then to print 1099's for each of us, so that we could file our taxes at tax time. After looking into doing my taxes, it seems that it's more complicated than that.

- Should we be paying ourselves that way? Nobody earns a wage and money is only distributed based on individual sales.
- With what's left in the account of the 10% that the company has been allocated throughout the year, how do we split that and where do we report that income?
- Do I need to itemize business expenses or can I just report my income and file my taxes that way?

Any help that anybody might give would be greatly appreciated. Thanks in advance for all of your help.

Best Regards,

Todd Hirsch

I don't see why you can't do it that way. You should, however, present each other with a paycheck, so it can be taxed, and you can get your tax return.