Tax

Have a Tax Question? Ask a Tax Expert

Ask an Expert,
Get an Answer ASAP!

Tax

My wife and I are establishing an LLC in GA with partnership

Customer Question
tax structure. The planned...
My wife and I are establishing an LLC in GA with partnership tax structure. The planned long-term membership split is 50/50. However, for 2016 we have an unusual situation with respect to 401k contributions and revenue to be billed through the LLC. The majority of billing to be done through the LLC was for worked my wife performed. Additionally, I maxed out my 401k individual contributions with a previous employer earlier in the year, and we want to maximum her contributions to a 401k for this year. However, the 50/50 split seems to complicate that. From a legal/IRS position is it unreasonable to start a LLC with 90/10 owner split in 2016 & then adjust to 50/50 in 2017? An alternate approach seems to have some revenue attached to her as a sole proprietor for this year versus running through the LLC (the complication here seems to be that multiple 401k plans would have to be created).
Submitted: 1 year ago.Category: Tax
Show More
Show Less
Ask Your Own Tax Question
Answered in 15 minutes by:
10/25/2016
Tax Professional: Barbara, Enrolled Agent replied 1 year ago
Barbara
Barbara, Enrolled Agent
Category: Tax
Satisfied Customers: 4,431
Experience: 20+ years of experience in tax preparation; 30+ years of experience as a real estate/corporate paralegal.
Verified

Welcome to Just Answer. My name is ***** ***** I will be happy to assist you.

The distributive share of each partner is determined by the partnership agreement. In the absence of a written partnership agreement, the partnership's profits will be split evenly.

A special allocation is when a partnership decides to allocate shares of profits in a way that's different from that specified in the partnership agreement, or in unequal shares for a partnership that doesn't have a written agreement.

For example, if you've been splitting profits equally with your partner but then decide to split them 60/40 one year, you may do so, but your reason must be for a substantial economic reason (perhaps your partner took an extended period off to travel and therefore didn't work as much). If it's not, and the IRS determines that the change was made primarily to lessen the aggregate tax burden of the partners, then the IRS will re-allocate the special allocation and you'll have to pay taxes according to your regular schedule.

The following link contains excellent information you will find helpful:

http://smallbusiness.findlaw.com/incorporation-and-legal-structures/partnership-taxes.html

Please let me know if I can assist you further.

Thank you and best regards,

Barb

Ask Your Own Tax Question
Customer reply replied 1 year ago
Thank you for your response. I have read the link you sent. I want to make sure I understand properly so I can move forward on all this. As I mentioned, the LLC is new for 2016 and is being created with a 50/50 allocation. For 2016, my wife's portion of the revenue created is virtually all of incoming cash flow (90% or more). So while doing a special allocation of something like 90/10 for this year is consistent with that, we do plan to leverage that position to maximize her contributions to a 401k this year. On one hand, this clearly will lessen the tax burden but on the other it is consistent with the business environment. Would a 'special allocation' created in case be defendable with the IRS if ever needed?
Tax Professional: Barbara, Enrolled Agent replied 1 year ago

Based on the information you have provided, yes.

Ask Your Own Tax Question
Tax Professional: Barbara, Enrolled Agent replied 1 year ago

Just following up with you to see if you have any other questions or concerns. If so, please let me know so I can further assist you.

Best regards,

Barb

Ask Your Own Tax Question
Ask Barbara Your Own Question
Barbara
Barbara
Barbara, Enrolled Agent
Category: Tax
Satisfied Customers: 4,431
4,431 Satisfied Customers
Experience: 20+ years of experience in tax preparation; 30+ years of experience as a real estate/corporate paralegal.

Barbara is online now

A new question is answered every 9 seconds

How JustAnswer works:

  • Ask an ExpertExperts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional AnswerVia email, text message, or notification as you wait on our site. Ask follow up questions if you need to.
  • 100% Satisfaction GuaranteeRate the answer you receive.

JustAnswer in the News:

Ask-a-doc Web sites: If you've got a quick question, you can try to get an answer from sites that say they have various specialists on hand to give quick answers... Justanswer.com.
JustAnswer.com...has seen a spike since October in legal questions from readers about layoffs, unemployment and severance.
Web sites like justanswer.com/legal
...leave nothing to chance.
Traffic on JustAnswer rose 14 percent...and had nearly 400,000 page views in 30 days...inquiries related to stress, high blood pressure, drinking and heart pain jumped 33 percent.
Tory Johnson, GMA Workplace Contributor, discusses work-from-home jobs, such as JustAnswer in which verified Experts answer people’s questions.
I will tell you that...the things you have to go through to be an Expert are quite rigorous.

What Customers are Saying:

I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response...

T.G.WMatteson, IL

I WON!!! I just wanted you to know that your original answer gave me the courage and confidence to go into yesterday's audit ready to fight.

BonnieChesnee, SC

Great service. Answered my complex tax question in detail and provided a lot of additional useful information for my specific situation.

JohnMinneapolis, MN

Excellent information, very quick reply. The experts really take the time to address your questions, it is well worth the fee, for the peace of mind they can provide you with.

OrvilleHesperia, California

Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help.

Mary C.Freshfield, Liverpool, UK

This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!!

AlexLos Angeles, CA

Thank you for all your help. It is nice to know that this service is here for people like myself, who need answers fast and are not sure who to consult.

GPHesperia, CA

< Previous | Next >

Meet the Experts:

Wallstreet Esq.

Wallstreet Esq.

Tax Attorney

586 satisfied customers

10 years experience

Mark D

Mark D

Enrolled Agent

1,300 satisfied customers

MBA, EA, Specializing in Business and Individual Tax Returns and Issues

Richard

Richard

Tax Attorney

4,338 satisfied customers

29 years of experience as a tax, real estate, and business attorney.

Robin D.

Robin D.

Senior Tax Advisor 4

13,980 satisfied customers

15years with H & R Block. Divisional leader, Instructor

Megan C

Megan C

Certified Public Accountant (CPA)

8,651 satisfied customers

Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level

jgordosea

jgordosea

Enrolled Agent

2,885 satisfied customers

I've prepared all types of taxes since 1987.

R. Klein, EA

R. Klein, EA

Enrolled Agent

1,839 satisfied customers

Over 20 Years experience

< Previous | Next >

Related Tax Questions
Can an LLC (partnership) pay taxes on income and avoid the
Can an LLC (partnership) pay taxes on income and avoid the partners having to pay the taxes?… read more
Chad EA, CFP ®
Chad EA, CFP ®
IRS Enrolled Agent, CFP(R),
Master\u0027s Degree
1,061 satisfied customers
Changing being taxed as an LLC sole proprietor to an LLC
changing being taxed as an LLC sole proprietor to an LLC taxed as an S-corp, do they need to file Form 8832 or Form 2553 or both?If both, in what order?THANKS… read more
abci168
abci168
Principal
27 satisfied customers
I have an LLC in CA. Originally it was a partnership, filing
I have an LLC in CA. Originally it was a partnership, filing a 1065 to the IRS. Now, the other partners have left and I want to file as a single member LLC, flowing back into my schedule c. The change… read more
Barbara
Barbara
Enrolled Agent
4,431 satisfied customers
I changed the structure of my sole proprietor business to a
I changed the structure of my sole proprietor business to a single member LLC mid year. Do I need to give my independent contractors 2 different 1099's? … read more
Richard
Richard
Tax Attorney
Doctoral Degree
4,338 satisfied customers
I file taxes as a sole proprietor (as a single member LLC,
I file taxes as a sole proprietor (as a single member LLC, cash basis) - I would like to pay my son to help me with the business. The LLC has no employees by design so my son (under 18) would be an ou… read more
Chad EA, CFP ®
Chad EA, CFP ®
IRS Enrolled Agent, CFP(R),
Master\u0027s Degree
1,061 satisfied customers
I am a sole proprietor operating an LLC in Wyoming providing
Hello, I am a sole proprietor operating an LLC in Wyoming providing business to business services and supplies related to lighting maintenance. I have a customer that is insisting that I supply inform… read more
emc011075
emc011075
Senior Tax Specialist
Bachelor's Degree
16 satisfied customers
You there? I'm in a two member LLC partnership with a friend
I'm in a two member LLC partnership with a friend and incorporated in Delaware with an EIN such that we can setup a business bank account. Our bank account is in California, do we file taxes in Delaware or California? … read more
Barbara
Barbara
Enrolled Agent
4,431 satisfied customers
With the new tax laws, if I'm a sole proprietor, would it
With the new tax laws, if I'm a sole proprietor, would it make sense for me to become an LLC? … read more
NPVAdvisor
NPVAdvisor
CFP Licensee and Practitioner
Master's Degree
180 satisfied customers
Penalty for late filing of partnership LLC tax return, not
Penalty for late filing of partnership LLC tax return, not eligible for Rev Proc 84-35 relief because one of the partners is a foriegner… read more
Barbara
Barbara
Enrolled Agent
4,431 satisfied customers
I file taxes as a sole proprietor (as a single member LLC,
I file taxes as a sole proprietor (as a single member LLC, cash basis). I need to know if I can deduct the finance expense tied to a line of credit for my LLC from income. I generally understand that … read more
Robin D.
Robin D.
Senior Tax Advisor 4
Vocational, Technical or Trade School
13,980 satisfied customers
If you are a sole proprietor llc and contributing to a SEP
If you are a sole proprietor llc and contributing to a SEP should it be contributed from a personal account or business account? I would think personal since on your tax return it is deducted on the 1… read more
abci168
abci168
Principal
27 satisfied customers
I have a penalty for late filing of partnership LLC tax
I have a penalty for late filing of partnership LLC tax returns and looking for examples of reasonable cause Reading about the FTA and checking if we could be eligible … read more
Carter McBride
Carter McBride
LLM
233 satisfied customers
If my spouse is a sole proprietor who has not been able to
If my spouse is a sole proprietor who has not been able to file, am I allowe'd to go ahead and file as married filing separately so I can satisfy the requirement to reconcile my medical MarketPlace?… read more
Chad EA, CFP ®
Chad EA, CFP ®
IRS Enrolled Agent, CFP(R),
Master\u0027s Degree
1,061 satisfied customers
Business tax question. I am a sole proprietor consultant and
Business tax question. I am a sole proprietor consultant and I travel quite a bit for business. I have been increasingly using uber instead of renting cars and I assume this is a deductible expense. I… read more
emc011075
emc011075
Senior Tax Specialist
Bachelor's Degree
16 satisfied customers
I have a client that was a Sole Proprietor. He formed an LLC
I have a client that was a Sole Proprietor. He formed an LLC and elected to be taxed as an S-corp on 8/1/17. He purchased a $39k vehicle in his sole proprietorship in 2015 and deducted Sec 179 and A/D… read more
LEV
LEV
Retired
Bachelor's Degree
14,896 satisfied customers
If an owner took a draw from the business (sole proprietor
If an owner took a draw from the business (sole proprietor llc) and the business is showing a loss excluding that draw then I assume no income or self employment taxes will be paid since there is a lo… read more
Barbara
Barbara
Enrolled Agent
4,431 satisfied customers
A sole proprietor with a tentative loss may deduct which of
a sole proprietor with a tentative loss may deduct which of the following for qualified business-use-of-home expenses:mortgage interest depreciation rent utilities… read more
Mark Taylor
Mark Taylor
Certified Public Accountant
Masters
2,267 satisfied customers
I am a sole proprietor LLC, and work in the Corporate AV
quot;I am a sole proprietor LLC, and work in the Corporate AV Meeting industry , with 2 kinds of AV income. W-2 from one company part time, and 1099 from other companies. Will my employer contribution… read more
Robin D.
Robin D.
Senior Tax Advisor 4
Vocational, Technical or Trade School
13,980 satisfied customers
Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Show MoreShow Less

Ask Your Question

x