Our LLC earns royalty income (RI). Only one member-partner is actively involved in the business. Is RI business income for all or non-business for passive members?
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richhawksworth
New Member

Our LLC earns royalty income (RI). Only one member-partner is actively involved in the business. Is RI business income for all or non-business for passive members?

I understand the distinction when applied to self-employed individuals, but can't find an answer when the royalty income is earned by a partnership. 

2 Replies
rschiera
New Member

Our LLC earns royalty income (RI). Only one member-partner is actively involved in the business. Is RI business income for all or non-business for passive members?

The royalty income from Schedule K-1 will be reported on Schedule E, Supplemental Income & Loss.  It is not subject to Self Employment Tax and is considered passive income.
richhawksworth
New Member

Our LLC earns royalty income (RI). Only one member-partner is actively involved in the business. Is RI business income for all or non-business for passive members?

Thanks for your reply. Just to clarify. Are royalties considered passive income for all LLC members or just the passive members?
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