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Old 06-10-2016, 10:42 AM
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LLC receives income from another LLC

Hi, what are the tax consequences if an LLC1 (using cash method) receives income from another LLC2 (accrual method).

LLC1 is a partner of LLC2.

Also, how are guaranteed payments treated?



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Old 06-10-2016, 08:17 PM
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Hi, what are the tax consequences if an LLC1 (using cash method) receives income from another LLC2 (accrual method). =====>Regardless of acct method of LLC2, LLC1 needs to report to income using cash menthod whenever LLC1 receives income form LLC2.portion of of the net taxable income of the LLC2 flows up to the LLC1 and, in turn, flows up to the member(s) of the LLC1 for tax purposes. This makes tax preparation slightly cumbersome because, each LLC needs to prepare tax schedules for each separate LLC, instead only one is prepared under the parent/dub LLC situation.

LLC1 is a partner of LLC2. =====>LLC-1 would be a member of LLC-2. But LLC-2 is not then a member of LLC-1. LLC-1 would have voting rights if admitted as a member. Of LLC2

Also, how are guaranteed payments treated=======>> members of an LLC NEVER receive W2 even if many tax pros usually MAKE a big mistakes by letting an LLC issue W2s to members;
As a member of a LLC, you may receive payment through a salary or any other form of planned, recurring payment or through payments that hinge upon the company?s financial performance, such as profit-sharing plans. The IRS classifies salary payments and other recurring payments as guaranteed payments, and it classifies profit-sharing payments as distributions. Because of the nature of guaranteed payments, the LLC receives tax advantages for all guaranteed payments it makes to members.LLCs can claim GP on 1065. Evn though the IRS relieves the LLC of much of the tax burden associated withGPs, the partners take up the slack. Because GPs aren?t considered wage income, they?re not subject to income tax withholding. Instead, members must make estimated income tax payments each quarter on all funds received through GPs. LLC members must also pay self-employment taxes on all guaranteed payments on their individual taxes.



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Old 06-14-2016, 02:57 PM
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Hi, if LLC2 issues schedule K-1 to LLC1 and there is a guaranteed payments on sched K-1, is the guaranteed payment reported on the partnership or the individual tax return (own LLC1)?



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