The Homebased LLC was set up with 2 owners each 50% owners (husband and wife) , now I want to change the percentage of profit sharing to 90%(husband)&10% wife ========>> LLC owned by married couples COMPLEX ANSWER covering both community property and not. If your state is one of the ten community states( and If you and your spouse each materially participate as the only members of a jointly owned and operated business and you file a joint return for the tax year), then, you can make an election to be taxed as a qualified joint venture instead of a partnership I mean mmllc. This election, in most cases, will not increase the total tax owed on the joint return, but it does give each of you credit for social security earnings on which retirement benefits are based and for Medicare coverage. By making the election, you will not be required to file the cpomplex and expensive Form 1065 for any year the election is in effect and will instead report the income and deductions directly on your joint return. If you and your spouse filed a Form 1065 for the year prior to the election, the partnership terminates at the end of the tax year immediately preceding the year the election takes effect. What I am saying is that A qualified joint venture is a special tax situation in which your couple ,a husband and wife, jointly running the business that is not a corp may qualify to file as a sole proprietorship rather than a partnership of MMLLC. The IRS has determined that in the case of spouses owning a partnership, they do not need to file as a partnership on Form 1065, with individual K-1 forms.
1.Do I need to change the ownership percentage , in order to change the percentage of profit sharing, if so , how is it done ? =========>>so as said previously once the LLC qualifies as a qualified joint venture then Both you and your spouse MUST file a separate Sch C of 1040, showing that each person's share of the income, deductions, and any profits/losses.In this case you may freely change the percentage of P&S , I mean any percentage of P&S between you and your spouse no problem at all.you do not need to fiel form 1065 and the LLC no need to issue Sch K1 of 1065 to you and your spouse.However, say ypur LLC is a pertnership I mean MMLLC, then, You can also change the profit sharing arrangements as often as you want - every day if you wish. If you are considering changing the ownership structure or percentages in the MMLLC, they key document that will guide you in how to transfer ownership in an LLC is your LLC operating agreement. You most likely signed an operating agreement when you set up your LLC. The operating agreement is a contract among the LLC?s members that specifies the way the LLC will operate. If it includes buy-sell or buyout provisions, those will govern the way you transfer ownership. Alternatively, your LLC may have a separate buy-sell agreement.
The buy-sell provisions will typically specify a method for placing a value on the business and its membership interests. They also might place restrictions on who becomes a member, require the LLC to buy back shares from a departing member, or specify what needs to be done to approve a transfer.
If your operating agreement does not include a buy-sell agreement, you should check your state statutes for guidance on how to transfer membership interests. You may be able to negotiate a buy-sell agreement or a written agreement to transfer ownership. In some states, you may have to dissolve the company if your operating agreement does not provide for ownership transfers. Since these actions can have long-term consequences for your business, it?s wise to consult with a lawyer
2.Do we need to report the change in profit sharing to IRS ? ========>> Even though a partnership a MMLLC does not pay its own income taxes, it must file Form 1065 with the IRS. This form, the same one that a partnership files, is an informational return that the IRS reviews to make sure that MMLLC members are reporting their income correctly. The MMLLC must also provide each MMLLC member with a Sch K-1 of 1065, which breaks down each member's share of the LLC's profits and losses. In turn, each MMLLC member reports this profit and loss information on his or her individual Form 1040, with Sch E of 1040 attached.