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What is the nature of the business? (meaning what do you do?)
Since you are both active in the activities of the partnership the income generated would be designated as "self employment earnings."
Note that as the LLC is a partnership you do not pay tax on any distributions you receive from the partnership (unless the distributions are in excess of your basis).
You pay tax on the income the partnership generates annually, not on the cash distributions you receive.
There is nothing you can do in the partnership agreement to change the fact that the income would be self employment income.
If one of you were not active in the partnership then it would be a passive activity for that partner and not subject to self employment income designation.
I hope this helps, please let me know if you have any further questions.
Let me know if something is not clear.
What is the nature of the business? (meaning what do you do?)The business is Internet marketing consulting. We work from home offices and primarily do business online.
Ok that would definitely constitute self employment income.
Let me know if you have any further questions.