while an LLC can have many classes of partners with different p&L %'s depending on the item this is not so for an LLC that elects S-Corp status. By tax law there can only be one class (not really true since some shares can have voting rights while others do not) but the % interest doesn't vary in doing the allocations unless one LLC member were to contribute more money (ie in corporate parlance has bought another block of stock) so before that date the old %'s are used and then after the % are recalculated to do the allocations for the year
S-Corp election for LLC - a poor example: H puts in $51 and W puts in $49 (block 1) (or H makes a gift of part of his interest and this can be done in other ways). They agree on splitting things 51/49 this would apply to everything including distributions because now tax laws apply to the LLC. this can be especially important when it comes to distributions because if they are not proportionate to ownership, the IRS could declare there is a second class of stock which would void the S-Election.
now H wants a higher ownership %. W can gift H part of her interest (gift tax return may be required)
or H puts in another $100 (block 2) and they agree that H now owns 151/200 and W now owns (49/200)
the allocation for the year is based on the weighted average of ownership for the year so if on day 181 the ownership % changes
the computation for allocations of p&L would be H 51/100*180/365+151/200*185/365
and for W 49/100*180/365+49/200*185/365
note that distributions prior to ownership change are based on the ownership %'s at that time afterward they're based on the new ownership%
note that you should confer with a lawyer. certain documents may need to be prepared to reflect the ownership change. should the iRS audit the LLC/S-Corp you do not want them changing allocations because of a lack of documentation. this could have a significant impact on your taxes
