I am not sure you understand how partnership tax works.
- You indicate that this is a 50/50 partnership. That means all income, loss, separately stated items are allocated between the members 50/50.
- A guaranteed payment is an amount that is "paid" to a member regardless of what the bottom line is. As an example: if member A receives a $10,000 guaranteed payment, this will be reflected on line 4a of the member's K-1 and line 14 regardless of whether the LLC had any income. It would be reflected there even if the LLC incurred a loss. This guaranteed payment is essentially "wages" to the member except not reported on a W-2.
- Sch K would reflect this same $10,000 amount.
- Line 1 of the K-1 reflects the ordinary income of the LLC and will be allocated in accordance with your 50/50 split. This occurs regardless of whether a member is a managing member or limited member. The only difference is the managing member's portion will be subject to SE Tax. The limited member's portion will not be subject to SE Tax.
- You now indicate that you are "keeping 100% of said ordinary income...". This is not a 50/50 partnership then. An allocation of anything other than 50/50 will require you understand and follow the very complex substantial economic effect regulations.
*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.
