I have recently started my first LLC (two years in). We are taxed as a partnership. Our member structure is as follows:
3 members with 25% each whom contribute services (the day to day operation) of the business.
1 member with 25% which made an initial contribution (not a loan) of $30,000.00
We recently filed our 2012 Taxes
, and we believe there may be an error. Trouble is our current CPA, says there isn't but is not able to explain in plain english on why not. This also applies to our 2011 taxes. But since we were so new, we didn't question it till now.
In 2011 (when our LLC formed/business started), our accountant said the 3 member who did not contribute money had to "match" the 1 member that did. The Accountant made an entry in Quickbooks reflecting each member making a Equity/Member Contribution of $30,000.00 which he then split between 2011 and 2012. I believe this was that the 3 were providing services.
Our Accountant then made a journal from the contribution account to each of "operating" members (3) "guaranteed payment" accounts, again splitting between 2011 and 2012 ($15,000 each).
The "problem" lies is that this is reflected on our K1's under "guaranteed payments". So in 2011 and 2012 it shows each of the 3 members taxable income
being $15000 (per year) more than what they took home.
We would like to know why we are getting taxed on our K1 for monies that the 3 members never actually received.