LLC Deductions

[denisemauldin]

I am a 50% owner in a 2 owner LLC. 

1) The LLC paid some expenses (business license, etc) out of the bank account for the LLC.  Do these expenses get deducted from the profits before the 50% owner split?

2) Each owner paid some expenses (travel, communications) directly.  How do I handle this?  Do I deduct all expenses from the profits and then do the 50% owner split or do I deduct my expenses from my share of the profits?

[DianeC958 · Accepted solution]

1) Yes, the expenses paid from the LLC bank account get deducted from the profits before the 50% owner split.

2) The individual expenses you have two options.  One you can have the company reimburse you for the expenses and then report the expenses on the tax return for the company before the 50% owner split.  

The other option is when you report the K-1 on your personal return you each take the expenses you individually paid for as Unreimbursed Partnership Expenses which then only reduces your split of the company profits for the expenses you personally paid.

To take the Unreimbursed Partnership Expenses as you put in your information for your K-1 the program takes you to a screen titles Describe the Partnership mark the first box on this screen with the description I am required to pay supplemental business expenses on behalf of this partnerhip/LLC for which I am not reimbursed.

Then the program will take through a number of screens to enter the information about your expenses for the business.

[denisemauldin]

Thank you Diane!  How do I do the company tax return before I do the 50% owner split?  Is this via turbotax or via the state website?

[Irene2805]

Since you are a 2-member LLC, you should file a Partnership return (1065)  (unless you're organized as an S-Corp.).  To prepare a 1065 you will need TurboTax Business.  You can visit the following link to purchase the program: TurboTax Business.  

TurboTax will take you through an interview to prepare the business return, similar to the personal (1040) products.

As part of preparing the 1065 return, TurboTax will prepare K-1 forms for each partner.  You will need to enter the information from the K-1 into your personal 1040 return.