<bacile99[at]yahoo.com> wrote:

- quote -

The issue you have to deal with is what I call a "Back
Office Decision" - this is where the two of you decide how
you want to handle the reimbursement. Your options include:

1 - reimbursement, up to the cash available, with the rest
as a loan due the member;
2 - reimbursement, up to a certain dollar amount;
3 - no actual reimbursement, instead the members claim the
mileage as an expense on the personal returns - NOTE -
this treatment requires that the LLC operating agreement
contains wording requiring the members to personally
responsible for such items.
4 - no actual cash reimbursement, instead the mileage is
booked as an expense and the offsetting entry is to
capital contributed by the member in question.

There are advantages and disadvantages to each option and
there are specific requirements to use some options. I
would suggest you meet with a local tax pro to get a better
idea of which is best suited to your circumstances. And
keep in mind that what is good for one of you may not be
good for the other or for the LLC. Frequently there is a
conflict of interest among the members and the best
interests of the LLC.

Gene E. Utterback, EA

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My partner and I operate a Michigan based LLC (we are taxed
as partnership so profits/loss are shown on each of our
personal incomes). At year end we showed a profit before
expenses of about $2000. However, we drive around a lot for
our business. When we applied the 37.5 cents per mile to
each of our mileage, partner 1 had a reimbusement expense
due to him of about $1000. Partner 2 drove around a lot
more and had an expense due to him of about $2000. There is
not enough money in the LLC to pay each expense due. So how
does this work? (as far as a carryover loss) Do we just put
in the books that partner 1 got his $1000, and partner 2 got
$1000 , but is still due another $1000 in the upcoming year
when we get more money? Or does partner 2 not get his
remaining balance due? (out of luck!) Thanks in advance.

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