Multi Member LLC Individual Profit

[mjdempsey52]

I have a multi-member LLC, and I have a question about the schedule K1s for the 2024 tax year. We have a partner that purchased equipment for the LLC during the year. When it comes time to report their share of the profit in the 1065 and K1, is there a way to indicate their purchase for the company, thereby reducing their share of the profit? This member takes no guaranteed payments and pulls no money out of the company. 

[Rick19744 · Accepted solution]

@tagteam is exactly correct.

What you have here is nothing more than a member contributing property which was purchased individually and then contributed the property to the LLC.

As was noted, this should technically increase that member's interest in the LLC.

You need to treat this as noted above, or alternatively, treat this as debt owed to the member; no different than if you borrowed money from a bank and then purchased the equipment.   If you do treat this as debt, you need to make sure the interest rate is at least equal to the IRS applicable federal rate (AFR) for the term of the debt.