Owner's distribution from a single member LLC

[sjmurphy1088]

We have a business reported on Schedule C that is a single member LLC.   We plan an owner's distribution from the business.  Our understanding is that this is not taxable income to us, and does not need to be reported on our tax return.  Please confirm.

John M

[VolvoGirl · Accepted solution]

Right.  You only report income and expenses on Schedule C.  Cash you take out is not an expense.  A Single Member LLC is a disregarded entity and it's all yours personally.  You are just moving cash from one pocket to your other pocket.  Unless your s LLC is a S corp.  Then you have a problem.  

[fredptheo]

Do I need to fill out some sort of 1099 to show the funds taken from the single entity LLC, like a 1099-R, or something along those lines?

[AliciaP1]

No, if you report your single-member LLC activity on Schedule C, you do not report the funds you have taken from the business anywhere.  You are considered a disregarded entity and you and your business are one and the same.  This means the funds from operating your business, which are reported as the net income on Schedule C, are yours as you earn them.

@fredptheo

[fredptheo]

Thank you, Alicia, for the quick response. While I knew that is supposed to be the case, when I go to fill in my PA business tax return, it is asking for my Net Profit for the business, and the Net, as shown in Schedule C is the profit on which I pay personal income tax, and if I show a Net Profit for the LLC on the business return, I get doubly taxed. I guess I'll have to figure out how to handle the PA business tax return so that doesn't happen. I thought there was possibly some sort of 1099 that would handle that for me.

Again, thanks for the response.

Fred

[fredptheo]

Thanks. I think I have it now.

[fredptheo]

I have a single member LLC in Pennsylvania but have moved to Louisiana. Do I claim the profit disbursement from the LLC in Louisiana as part of my personal state income tax, or in PA, or in both, which would seem to be double taxation?

[Vanessa A]

If the LLC is earning money in PA, you would need to file a return in PA and Louisiana. You would file the PA return first, then you would take a credit on your Louisiana return for taxes paid to PA. 

So, yes, you will be filing for both. Also, if you lived in PA for part of the year, you will be filing a Part Year resident return for both.  PA you will include the income for the entire year.  Louisiana, you will include the income you received while living in the state. 

[fredptheo]

I kept trying to figure out how to handle both without being doubly taxed but also not having PA come after me later on. We are moving the company to Louisiana so this coming year will be easier.

Thanks.

[KrisD15]

If you are living in Louisiana, but the LLC was still earning income in Pennsylvania, you will file a Part-Year resident return for PA (or non-resident if you did not live in PA in 2022) and claim the income earned in PA.  You don't really report the "disbursement" you report what the LLC earned in taxable income. The income from Schedule C flows to the Taxpayer, so there really is no "disbursement" just the amount of income that the taxpayer needs to claim on Schedule C for that business. If the business moves mid-year, you only claim what was earned while it was in that state. You can't find this information on your federal tax return, you need to figure this from your company records, such as QuickBooks.

Next, you file a Resident return for Louisiana  (or Part-Year Resident return if you only moved there in 2022).

If the business was in PA all year, and that is the ONLY source of income you have, you will claim all the income the business (you) earned on the PA return.

If you were a resident all year in LA, you will claim all the income for the year.

(If only part-year, only claim what was earned while you lived there) 

You are not double-taxed because in this situation, the state you live in now (LA) will give you a credit for the tax you pay in PA. 

To do this in TurboTax always do the former state (PA) FIRST, then when you do the LA return, the program knows the amount of tax to credit on the LA return. 

[fredptheo]

Thank you, and I wish I had asked this question earlier as I would have done the PA portion first. I started with the LA and now will have to go back and redo the program. So, thanks for putting that last piece in there.