topic LLC husband-wife both have 100% ownership in Business & farm

LLC husband-wife both have 100% ownership

JerryR — Fri, 28 Feb 2020 18:55:55 GMT

My wife and I have a domestic LLC based in Colorado. In past years, our accountant has shown each of us to have 100% ownership and 50% profit/loss. When I try to do this in 2019 turbotax business, it complains that the ownership % is over 100%. I am specifying that the profit/loss percentage is different from the ownership percentage. How do I show both husband and wife as each having 100% ownership?

Re: LLC husband-wife both have 100% ownership

Anonymous_ — Fri, 28 Feb 2020 19:15:21 GMT

You can indicate that the partnership (LLC) makes special allocations.

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Re: LLC husband-wife both have 100% ownership

MarilynG1 — Fri, 28 Feb 2020 19:40:33 GMT

Please see response from @Anonymous_.

[Edited 2/28/2020 12:40 pm]

Re: LLC husband-wife both have 100% ownership

Anonymous_ — Fri, 28 Feb 2020 19:28:34 GMT

Colorado is not a community property state so @JerryR and his wife cannot treat the LLC as a disregarded entity and each file a Schedule C.

Further, it was explicitly stated that TurboTax Business was being used, which obviously does not contain Schedule C.

Re: LLC husband-wife both have 100% ownership

Rick19744 — Fri, 28 Feb 2020 20:47:53 GMT

I assume you are referring to your Schedule K-1 Line J where it reflects capital ownership?

If my assumption is correct, I believe the accountant was incorrect in the presentation. This amount should be based on the capital each member put in which should agree to the operating agreement.

The prior accountant most likely indicated ownership based on the rules of attribution and that is not correct. The K-1 instructions for this line make no mention of attribution ownership. The instructions state that "...the capital line is the portion of the capital you would receive if the partnership (LLC) was liquidated at the end of the year...."

So if your capital ownership is equal to your profit and loss allocation, that is the percentage you need to use.

Re: LLC husband-wife both have 100% ownership

JerryR — Sat, 29 Feb 2020 16:06:20 GMT

I am referring to Schedule B-1 Part II (Individuals or estates owning 50% or more of the partnership). In previous years the accountant listed my wife and myself and then specified 100% for each of us in column IV, Maximum Percentage Owned in Profit, Loss or Capital. Someone once explained to me that the 100% for each us in Sched B-1 was because both the husband and wife in an LLC can be held responsible for 100% of the LLC.

On Schedule K1, line J (for each of us), he showed 50% (beginning and ending) for profit, loss and capital.

In Turbo Tax business, when entering Partner/Member information (using step by step), it asks for the ownership percentage and then has a check box to say that the profit or loss % is different from the ownership percentage. Checking this box allows yo to specify different values for profit %, loss % and ownership %. However, if I indicate that myself and my wife both have 100 % ownership, it complains that total ownership does not equal 100%.

Maybe the answer is to override the Schedule B-1 entries using form view and enter 100% for both husband and wife?

Re: LLC husband-wife both have 100% ownership

Anonymous_ — Sat, 29 Feb 2020 16:48:32 GMT

You can actually change that in Forms Mode.

Open Schedule B-1 in your list of forms and enter the percentage (100%) directly on that form for each of you.