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zwold21
New Member

In a multi-member LLC with 3 partners, only 2 partners contributed money. Ownership is split 3 ways, how are losses split? Can each money partner only deduct 1/3 loss?

 
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5 Replies
DDollar
Expert Alumni

In a multi-member LLC with 3 partners, only 2 partners contributed money. Ownership is split 3 ways, how are losses split? Can each money partner only deduct 1/3 loss?

Are you filing as a Partnership - Form 1065?  Or S-Corp - Form 1120S?
bwa
Alumni
Alumni

In a multi-member LLC with 3 partners, only 2 partners contributed money. Ownership is split 3 ways, how are losses split? Can each money partner only deduct 1/3 loss?

If this is a partnership there is no "standard" way to allocate profits and losses.  Rather, they are allocated based on whatever ratio the members agree among themselves to allocate it.

If this is an S-corporation, profits and losses are allocated based on the members ownership interest in the S-Corporation.  Normally, this would be based on shares of stock.

DDollar
Expert Alumni

In a multi-member LLC with 3 partners, only 2 partners contributed money. Ownership is split 3 ways, how are losses split? Can each money partner only deduct 1/3 loss?

If you are filing as a partnership using Form 1065, you allocate income and losses however you would like.  Income and losses do not have to be allocated the same way.  You can also designate guaranteed payments to partners which are made before the allocation of income or loss.

If you are filing as an S-Corp using Form 1120-S, you have to allocate according to ownership.  You can designate different salaries to each of the owners which is made before the calculation of net income/loss, but the income and losses have to be allocated according to ownership.

zwold21
New Member

In a multi-member LLC with 3 partners, only 2 partners contributed money. Ownership is split 3 ways, how are losses split? Can each money partner only deduct 1/3 loss?

Ok thanks, and that makes sense.  I'm going through and assigning a 1/3 split on the profit, but a 50% loss to the 2 money partners.  When the K-1's are generated using Turbotax Business, however, it's splitting the loss 3 ways.  Does anyone know what I need to do so that the losses are only assigned to the 2 partners who contributed money?

DDollar
Expert Alumni

In a multi-member LLC with 3 partners, only 2 partners contributed money. Ownership is split 3 ways, how are losses split? Can each money partner only deduct 1/3 loss?

Can you post that as a new question?  That way others searching for the same answer can find it more easily.
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