2022 Retained Earnings from an LLC

[jimwalter23]

Our LLC had $9,000 in retained earnings from 2022 to 2023. We would have paid taxes on these earnings, so how do I account for distributing them in 2023 and not pay taxes twice on them?

[Katie-P]

Hi @jimwalter23 !

Thanks for participating in our Ask the Experts Event! I'm happy to help you today.

The distribution of any net profits from the LLC will not be a taxable event. Let's say that you are a partner in a multi-member LLC. In this case, the entry for the distribution would be a Debit to the partner's distribution account, and a Credit to the bank account from which the money is being distributed. There is nothing in this transaction that would cause any earnings to be taxed twice. 

I hope this information is helpful, but please reply back if you have any follow-up questions. Thank you, @jimwalter23!

[Anonymous_]

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@jimwalter23 wrote:

Our LLC had $9,000 in retained earnings from 2022 to 2023. 

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Since you apparently have a multi-member LLC (presumably filing a 1065 with K-1s to members), you would be subject to taxation on the ordinary business income reported on your K-1 regardless of whether that income was distributed or not.

At the point when that previously taxed income is distributed, it is not taxable again (provided the member's basis in the LLC is not exceeded).