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The loan from LLC A and LLC B would not be a taxable event. If LLC A, used earnings to lend to LLC B, the earning would still be taxable to LLC A.
Let me give a few examples. Let's say LLC A was started with $100,000 capital contributions from its members. LLC A lends LLC B $100,000. This is not a taxable event. When LLC B, repays the loan with interest LLC A will recognize the interest.
2nd example, LLC A generated a net income of $100,000. LLC A loaned $100,000 to LLC B. The $100,000 is still taxable to LLC a. There is no taxable consequence to LLC B. Again when LLC A is paid interest it would be taxable to LLC A and deductible to LLC B.
The loan would be an asset to LLC A and a liability to LLC B.
The loan from LLC does not impact the taxable earnings. LLC A would report the taxable income that it earns in the current year. A loan would not have a current tax impact to either LLC A or LLC B.
The loan would only impact the balance sheet of both LLC's. The income statement would not be impacted until interest is paid on the loan.
No matter what the entity selection is, a loan would not impact earned income. The earned income would be taxable in the current year (no matter if a LLC, Corporation, S-Corporation or other entity type).
What are you trying to accomplish with the loan?
Since the LLC are commonly owned you have related parties. Interest expense to LLC B would be interest earned to LLC A. In the ownership is the same it would be a wash. You are correct that whether the money is loaned from LLC A or the members of LLC B contributed the capital it would be the same treatment from a tax standpoint. This would be true if the members of LLC B are personally liable for the loan from LLC A.
If LLC A generated net income, the income would be reported in LLC A in the current year no matter if LLC A distributes the funds to its members, loans the money to LLC B, or retains the money within LLC A.
It was my pleasure.
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