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woodysauto
New Member

In a small LLC classified as a partnership, can the profit be allocated on the k1 based upon hours worked in the business?

 
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AmandaR1
New Member

In a small LLC classified as a partnership, can the profit be allocated on the k1 based upon hours worked in the business?

The activity must be allocated according to the partnership agreement. It will define the partner allocation percentages for income and expenses and for taxes should be followed. 

It's not allowed to choose to allocate based on hours worked in the business, unless that's what stated in the partnership agreement, but I have never seen an agreement structured that way. As to whether you can include that in a partnership agreement or not, would be a legal question and you would need to speak to a lawyer.  

Partnership allocations are always defined as a percentage. Often it's common for one partner not to work in the business, but still receive a percentage of the earnings because they contribute in some other way. 

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AmandaR1
New Member

In a small LLC classified as a partnership, can the profit be allocated on the k1 based upon hours worked in the business?

The activity must be allocated according to the partnership agreement. It will define the partner allocation percentages for income and expenses and for taxes should be followed. 

It's not allowed to choose to allocate based on hours worked in the business, unless that's what stated in the partnership agreement, but I have never seen an agreement structured that way. As to whether you can include that in a partnership agreement or not, would be a legal question and you would need to speak to a lawyer.  

Partnership allocations are always defined as a percentage. Often it's common for one partner not to work in the business, but still receive a percentage of the earnings because they contribute in some other way. 
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