Thank you for the information. I am still not clear on whether we would select, for Part ll Item G, "General partner or LLC member-manager" or "Limited partner or other LLC member". I assume we have to select one or the other per the IRS instructions.
We do not have a designated managing partner in our Operating Agreement, we are both simply members of an LLC. There are no other members but for us two. We both fully participate in the business of the company as cosmetologists. So in that sense, we are not limited partners either.
For Item H1 we check "Domestic Partner". And for Item I1, "What type of entity is this partner?" we check "A" for active individual.
For whatever reason, Part lll, Box 14, "Self-employment earnings (loss)" is empty even though Box 1, "Ordinary business income (loss)" includes a positive amount of about $20K for each of us (not a great first year but we'll hopefully grow). This may be due to the fact that we checked "Limited partner or other LLC member".
Reading the IRS Instructions, I see this: "Generally, a limited partner's share of partnership income (loss) isn't included in net earnings (loss) from self-employment. Limited partners treat as self-employment earnings only guaranteed payments for services they actually rendered to, or on behalf of, the partnership to the extent that those payments are payment for those services." There are no guaranteed payments in our business operations.
But again, we are not limited in the context of our ability to manage the LLC business. So, in that sense, we are both actively managing the business? Even though neither of us are identified as a "managing partner" in the LLC Operating Agreement...although the agreement describes our LLC as a ""Multiple Member-Managed Limited Liability Company". Hmmmm, maybe I answered my own question? Perhaps we would each select General Partner after all....even though page 58 of the IRS Instructions for Form 1065 for reporting Analysis of Net Income (Loss) per Return says, "For each type of partner shown on line 2, enter the portion of the amount shown on line 1 that was allocated to that type of partner....report all amounts for LLC members on the line for limited partners. Again, this guidance adds to the confusion.
Any assistance would be much appreciated!
