Your purchase of the LLC interest should have been a third-party transaction between you and the member from whom you purchased your share of the LLC. If the seller agreed to installment payments, was there a formal agreement for this transaction? How do you pay the seller? From the payments you receive from the LLC? Did the payoff agreement include any interest on the balance? You may be able to deduct investment interest expense if you have documentation for the amount of interest you are paying on the purchase price of the LLC.
Schedule K-1 reports your allocated income from the LLC. In addition, if you are "paid" by the LLC, you either received Form W-2 (wages) or self-employment income (guaranteed payments) on Line 14 of the K-1. At this point, it appears Schedule K-1 is the only information you need to enter on your 1040 individual tax return.
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