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Thank you for your reply and willingness to help. I hope I can answer your questions. I do not understand your questions actually...
I think I'm following you in regards XXXXX XXXXX it doesn't matter that she took 100% - it's part of the revenue and that's taxable income. Okay.
The disbursement issue -
The other partners do not take 100% of any funds. We have reimbursements but we do not have any A/R where we take 100% of the revenue. I did end up getting a small 1099 last year from the company, but I believe it was for a reimbursement and thus wrongly 1099'd.
I think I need help understanding either business tax process or law regarding how a company classifies salary versus 1099.
My accountant said that as an LLC we can and should be categorizing the direct disbursements as just that - disbursements. But the salary and commissions we pay employer taxes on.
Can you help?
Thank you, Pearl. This is helpful.
- We do not have an operating agreement. So, everything is based on verbal and the history of how we've been doing work. (Yes, shame on me!)
- I have hired an attorney and we have a pending suit, thus my research.
You mentioned -- "...assist in outlining the litigation side of your question, once I understand it a bit more. One of my favorite techniques is using the court system to expose the financial irregularities, almost guaranteeing an IRS examination (which would correct the tax problem without you demanding same. You can also do this by disputing the amount of income to report from the LLC, without going to court."
Can you point me in the direction to understanding this better?
Let me know when or if our dialogue gets too long and I should resubmit so that you are properly compensated.