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Thread: Filling taxes for domestic LLC

  1. #1
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    Exclamation Filling taxes for domestic LLC

    Hi guys, I have a question about taxes I hope someone with experience can help me. I don't need professional help, just advice from another business owner who's done it before.

    I registered an LLC company (as partnership) last July with another person. Right now it's time to file taxes for the year.

    We didn't really have any revenue coming yet, but we had a bunch of expenses we are going to file.

    I know LLC expenses/income must be filed individually, based on ownership %. In our case it was 51% me and 49% him. Also we are going to change our ownership because we are getting money and new people on the board. So our personal ownership will be 70% me and 5%, I think it shouldn't matter if we file taxes first and then update our operating agreement, but who knows.

    I found this on intuit and this is very confusing for me:

    Limited liability companies that are subject to the partnership tax rules are not responsible for actually paying the tax on business earnings, but are responsible for preparing annual partnership tax returns on IRS Form 1065. This return is for informational purposes only; all income, deductions and credits are reported by each individual owner.

    The LLC reports each owner's share of these amounts on a Schedule K-1 at the end of the year. For example, if you and a friend create an LLC to run a business that earns $100,000 and has $60,000 of deductible business expenses, then each of you will receive a Schedule K-1 with $50,000 of earnings and $30,000 of deductions. Both of you must then report these figures on your personal income tax returns. Essentially, the business will increase your personal taxable income by $20,000.
    In my case I think it should be easy because all we need to do is to report expenses on each side.

    Please help.

  2. #2
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    What it's saying is that the partnership must create and file a form K-1 and any supporting forms it wants and that is then distributed to the partners who also include it with their tax returns and the numbers from the return migrate to the tax return in proportion to your ownership stake at the end of the year. What Intuit missed in its explanation is that the LLC's partnership agreement has the two people as equal partners, which is not true in your case, so you adjust your numbers accordingly.
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