If my LLC is a partnership and if each partner is charged with his/her % of the income for the year but the income is not distributed to them, how is that non-distributed income treated for purposes of the LLC? Also, if non-distributed income stays in an LLC for which taxes have been paid by members, what happens if the partnership is sold or dissolved? Will the partners be taxed a second time on these monies? Thank you for your help.
Non distributed income would increase partner basis in the LLC. Income is only taxed once.
I like your answer John, it is short and to the point and totally answers the question!
Yes, partners in an LLC need to pay taxes on their share of all income of the partnership, whether or not that income was actually distributed.
And as John said, any non-distributed income increases the partner's capital account, or basis in the business. When the business is sold, the partner's basis will be used to calculate any gain or loss on the sale.
Kathleen Napolitano, EA
[URL=http://www.kathleennapolitano.com]Taxes,Accounting,Business
Coaching[/url]
jbeidle | Contributor | 1/14/2011 - 6:08 pm
Kathleen | Window Shopper | 1/18/2011 - 11:44 pm
Join The Discussion
You must be logged in to join the discussion. If you already have an SBA Community account, Log In to join the discussion.
New users, Register for a new account and join the conversation today!