Based on the facts, the interest income should be reflected on Sch K line 5 and also on Sch K-1 line 5 for each member of the LLC. This is just portfolio interest since earning interest is not the main activity of the LLC (ie lending institution).
I assume you have an amortization schedule that will provide you with the information you need based on payments received.
The principal of the note will be reflected on your balance sheet as an asset.
*A reminder that posts in a forum such as this do not constitute tax advice.
Also keep in mind the date of replies, as tax law changes.
