- quote -

I'm assuming the LLC is filing form 1065. In this case they
would be making a distribution, and on the books you would
DR the members capital account and CR cash when paid.

For the S corp if you are taking a distribution from AAA or
paying a dividend from E&P, you would DR R/E and CR cash.
If it is a distribution from AAA, make sure to adjust the
shareholder's basis.

- quote -

Distributions and dividends would be reported on schedule K
and the member's/shareholder's K-1 for the LLC and the S
corp somewhere at the bottom (I don't recall the line
numbers). The LLC and S-Corp distributions would be
reported on schedule M-2, but the S-Corp E&P dividends would
not be reported on schedule M-2 (the shareholder would
receive a 1099-DIV)

- quote -

If the LLC is filing a 1065, no "wages" are paid to members.
This cannot be elected. They either take distributions
from their capital accounts, or receive a guaranteed
paymentl. If the member is being reimbursed for their
services and one member may make more than the other member,
then the guaranteed payment may be the way to go. However,
if the members are splitting everything equally, then the
distributions would be alright. Now distributions may be
advantageous over guaranteed payments since guaranteed
payments are subject to S/E tax, but income from the LLC may
not be subject to the S/E tax based on how aggressive one
wants to be with the temporary regs covering LLC's and S/E
tax.

On the books I set up an expense account called "guaranteed
payments", and a capital account for each member (actually I
set up 3 accounts for each member - "member's capital",
"member's capital - contributions", "member's capital -
distributions" - at the end of the year the member's share
of income along with the distributions and contributions
will close to the "member's capital" account).

Guaranteed payments are an expense to the LLC and income to
the individual receiving the guaranteed payment. The
guaranteed payments would show up on page 1 of the 1065, on
schedule K, on schedule M-1, and on the member's K-1.

Distributions would be reported as described above in my
third paragraph.

It would be wise to seek a local professional to help you
with all of this since there are other issues with regards
to LLC's and S corporations that you may be unaware of.

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >

How are dividends paid by LLC and S Corp treated on the
Accounting Books? - Are the Entries debit Retained Earnings
and credit Cash when paid? Where are they reported on tax
for LLC and S Corp?

Also, owners in a S Corp are employees and therefore can pay
themselves salaries subject to payroll taxes but LLC members
are self-employed so if they take money out during the year
(different amounts by each member) to pay themselves, what
is that called? How is this treated on the books and where
is this reported on tax? Can they elect to be paid salaries
subject to payroll taxes?

Thanks in advance for your help.

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >