"Larry" <clark.cpa[at]earthlink.net> wrote:

- quote -

This is really complicated. In general you have to allocate
profits and losses according to the capital account (share
of equity).

To avoid this rule you have to have some basis for claiming
that your preferred distribution reflects some sort of
economic reality. The fact that someone can use
distributions or deductions more than someone else is not
considered a valid reason.

Stu

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Larry wrote:

- quote -

Since the default status tax wise of an LLC is that of a
partnership, nothing wrong with this idea. In a typical
partnership owners are paid in some combination of 1.
interest on investment (but not true interest; just part of
their share of profits) 2. time spent on company business
and 3. division of profits in a predetermined %. all this
will be spelled out in the LLC's operating agreement,
similar to a partnership agreement.

ChEAr$,
Harlan Lunsford, EA n LA

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Hi. I have a client with investors who want to be owners
(probably an LLC so they would be members). Managing member
would like to pay interest to the investor/members based on
their equity amount. He will also pay them a share of the
profits. A bank has agreed to loan the funds needed in the
company, but owner/manager would rather pay the interest to
the other owners. He needs the interest to be an expense,
since the share of profits paid to them are actually
combined with the profits from another unrelated company
(sort of a joint venture). Any suggestions? THanks in
advance!

<< ================================================== ===== > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >