Confused about general partner or LLC Member Box vs Limited Partner or LLC Member Box

[fcarbone]

My wife and I split the LLC 50/50, with equal responsibilities.

On my 1065 I checked off Managing LLC Member for both of us and generated K-1's.

When entering K1's with Turbo Tax Home and Business, it has 2 boxes to choose from.

-General Partner or LLC Member

-Limited Partner or Other LLC Member

We are set up in the LLC as both Member-Managed, so from the 1065, entering K1's in Turbo Tax Home and Business, and originally setting up the LLC, I am not sure how this is all related, but I would like to get this right.

 I do not believe  that either one of us is a General Partner or a Limited Partner. So it comes down to LLC Member or other LLC Member.

[tagteam]

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@fcarbone wrote:

So it comes down to LLC Member or other LLC Member.

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The box you want to check is LLC Manager based upon the facts you presented.

Also make sure you indicate that you materially participated in the LLC's business activities since that appears to be the case as well.

[fcarbone]

Thank You,

When I create the K1,s, I check Managing LLC Member. 

Upon entering my K1's to create my Form 1040, is where I am hung up, and I noticed a large difference in Federal Taxes owed,  if I play with it.  An LLC Manager there I believe, is someone hired to manage the LLC. Of the 2 boxes, to choose, it still is not clear. 

[tagteam · Accepted solution]

The specifics should be outlined in your operating agreement but, basically, an LLC can be member-managed or manager-managed. The latter is typically a third party brought in to run the daily affairs and operations of the company.

Most small LLCs are member-managed with one member (or more than one) designated as the managing member who is responsible for operating the day-to-day affairs of the company. 

With respect to a large difference in "Federal Taxes owed,  if I play with it", exactly what are you playing with in the program? Simply checking one box or the other should not have a significant impact in your case, unless you omitted some key facts. Again, if you incurred some sort of loss, then the passive activity loss rules could come into play if you indicated you did not materially participate.