<guavaln[at]yahoo.com> wrote:
- quote -

An LLC can also be an S Corp.

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John Smith wrote:

- quote -

For tax purposes the LLC is a C corporation, so the C
corporation rules apply. The distribution is a dividend to
the extent of the corporation's earnings & profits. So in
your example, the $5,000 would be all dividend.

Of course, the member should be taking a salary if he or she
is performing services for the corporation. Salary, but not
a dividend, would be deductible by the corporation.

Katie in San Diego

The foregoing is intended for educational purposes only and
does not constitute legal or professional advice.

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I have a question about accounting for distributions when
the LLC is being taxed as a corp.

I am familiar with the rules when it comes to Sole Props and
Pships -- distributions being draws against the member's
capital account.

But what happens when the LLC is taxed as a corp. How is a
distribution (or I guess a dividend) treated against the
member's capital account.

For example, say that the sole member contributed $1000 to
the LLC. Then $15000 in income is earned. Then the member
wants a $5000 distribution.

Is the whole $5000 treated as a distribution (or dividend)
which is taxed to the member as a dividend or is only 4000
treated as a distribution/dividend with the $1000 being
reimbursement of capital?

Any insight would be appreciated?

Ryan

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