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I have a question about LLC expenses. In a partnership LLC…

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I have a question about LLC expenses

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In a partnership LLC in Kansas, must expenses be equal between members?

Accountant's Assistant: Is there anything else important you think the Accountant should know?

The business is held in the managing member’s home

Submitted: 2 months ago.Category: Finance
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12/11/2017
Financial Professional: Chad EA, CFP ®, CERTIFIED FINANCIAL PLANNER TM, Professional replied 2 months ago
Chad EA, CFP ®
Chad EA, CFP ®, CERTIFIED FINANCIAL PLANNER TM, Professional
Category: Finance
Satisfied Customers: 1,369
Experience: Federally licensed IRS Enrolled Agent, Certified Financial Planner (R), MBA
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Q: In a partnership LLC in Kansas, must expenses be equal between members

The expense in an LLC do not have to be equal. Expenses should be covered in the LLC's Operating Agreement and can be adjusted as needed even after the tax year is over.

Each state has laws that set out basic operating rules for LLCs, some of which will govern your business unless your operating agreement says otherwise.

What to Include in Your Operating Agreement

There's a host of issues you must cover in your LLC operating agreement, some of which will depend on your business's particular situation and needs. Most operating agreements include the following:

  • the members' percentage interests in the LLC
  • the members' rights and responsibilities
  • the members' voting powers
  • how profits and losses will be allocated
  • how the LLC will be managed
  • rules for holding meetings and taking votes, and
  • buyout, or buy-sell, provisions, which determine what happens when a member wants to sell his or her interest, dies, or becomes disabled.
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Financial Professional: Chad EA, CFP ®, CERTIFIED FINANCIAL PLANNER TM, Professional replied 2 months ago

If you have any additional questions please let me know.

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Financial Professional: Chad EA, CFP ®, CERTIFIED FINANCIAL PLANNER TM, Professional replied 2 months ago

Here is an additional link for more information regarding LLC Operating agreement.

https://www.nolo.com/legal-encyclopedia/llc-operating-agreement-30232.html

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Customer reply replied 2 months ago
In the event the operating agreement was not that specific, what then?
Financial Professional: Chad EA, CFP ®, CERTIFIED FINANCIAL PLANNER TM, Professional replied 2 months ago

You are still able to create an operating agreement (even after the tax year is complete) and should create an agreement as soon as possible.

If you do not have an operating agreement and can come to a solution with the other LLC members then you will be subject to state regulations.

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Financial Professional: Chad EA, CFP ®, CERTIFIED FINANCIAL PLANNER TM, Professional replied 2 months ago

Free Kansas LLC Operating Agreement Template |

https://startabusiness.org/ks/llc/operating-agreement/

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Customer reply replied 2 months ago
There’s more specific information—the business is now in liquidation. But Bank has issued notices of “right to cure” against collateral that was supposed to have been released.
Financial Professional: Chad EA, CFP ®, CERTIFIED FINANCIAL PLANNER TM, Professional replied 2 months ago

If you don't have a current operating agreement and can't come to terms then you may both be fully liable for any debt that you owe the bank.

___

The bank will generally want to work with you to reorganize the loan, if you are able to qualify for a loan modification, short sale or deed in lieu if you have to. Applying for any one of these options will require you to complete additional paperwork for the bank and you will need to work with your partner.

___

It would suggest that you and your partner work with someone who can assist you in restructuring your debt, because the bank will move forward with a foreclosure if they do not receive a response from either you or your partner.

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Customer reply replied 2 months ago
We’re way past that point as well...just can’t figure out how the bank represented that the $80,000 paid would release the collateral, yet no lien release was filed with the register of deeds and Bank is now demanding payment or foreclosure will proceed on collateral that should have been released.
Financial Professional: Chad EA, CFP ®, CERTIFIED FINANCIAL PLANNER TM, Professional replied 2 months ago

Did the bank discharge the debt owed? Or did you pay $80K and not receive a lien release? If the debt was discharged the bank would/should issue a 1099 C to the LLC, then partnership would split the expenses according to the operating agreement. - please let me know if I have misunderstood your situation.

If the lien wasn't released then you generally can provide proof of payment and request a lien release. The lien releases are completed in a back office setting, but you can request the lien release at a local bank or over the phone.

Absent of partnership agreement and lacking the ability of the partners to come to an agreement, then the partnership should generally split the expenses.

The agreement between the partners doesn't have to necessarily be in writing but does need to be something agreed to by the partnership. For example when the partnership was first created what was your belief of how the expenses and profit should be allocated? - Any verbal agreement will help your position as long as the other partner admits to the verbal agreement.

Banks do make errors when processing and recording payments. I have plenty of experience in this field due to my experience working closely with the operation departments of several banks.

If you provide me some more detail I will be happy to assist you the best I can.

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Financial Professional: Chad EA, CFP ®, CERTIFIED FINANCIAL PLANNER TM, Professional replied 2 months ago

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A positive rating of five stars is always appreciated.

Thank you

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Financial Professional: Chad EA, CFP ®, CERTIFIED FINANCIAL PLANNER TM, Professional replied 2 months ago

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