I have a multi-member LLC. When we get projects we decide ahead of time who will get what share of the income. We don't have much overhead and we usually draw what we agree is fair based on the amount of work, leaving a small amount in the account to pay for expenses that come up. Now it is tax season and because we started the company together (each member has a 33.33% share), is it correct that we each have the same K-1 amount added to our personal income? (Ordinary business income split into thirds)?
So for example, Partners A and B did most of the work so drew most of the money. Does Partner C have to report the same amount of income just because he is a 33.33% member in the operating agreement? Seems like A and B should be taxed more for earning more and Partner C should be taxed less. It doesn't make sense to me that he should owe the same amount of taxes because in reality he participated less and profited less.
Any advice is welcome. Thank you!
