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MequonCPA
MequonCPA, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 2342
Experience:  CPA, Over 30 yrs experience w/individuals and small businesses. Masters in Tax.
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How do I pay a member of an LLC 100% of the year end profits

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How do I pay a member of an LLC 100% of the year end profits in Quickbooks Pro 2010?

My husband has a U.S. partnership LLC. During the 2009 tax year, he paid all of the income from his two clients into his business checking account. He did not record draws of salary throughout the year and now he wants to record the transfer of 100% of the profits (in accordance with terms in the operating agreement) to himself as a single transaction at the end of 2009 tax year. How is this done? How do I make the transaction flow through the appropriate account? (I see accounts "Member1 Draw" and Member 1 Equity" listed. Do I use these or need to create another account?)
Is this a single member LLC or are there multiple members.
Customer: replied 7 years ago.
It is a partnership LLC

DearCustomer-

 

To allocate essentially all income to one member, the draws should be classified as guaranteed payments. This amount will then be deducted on Line 10 of Form 1065 and included in the income of the receiving member. Any remaining income or loss will then be allocated base on the ownership percentage.

 

MequonCPA and other Tax Specialists are ready to help you
Customer: replied 7 years ago.
Thank you for your answer but in terms of Quickbooks Pro 2010, how do I process the transaction? Do I pass the payment from the checking account through Member 1 Draw (my husband being Member 1) and make a journal entry or similar to indicate that it is a guaranteed payment? Or do I have to create another account?

You should set up another expense account "Guaranteed Payments" and post the checks to that account.