Originally Posted by firebird_ak
#1;Is it beneficial to the investor for the llc to award to him the yearly losses?
#2;How much loss would have to be rewarded in order for him to fully recover his investment? I hope to pay him 100% of the losses and also a percentage of the gold as a way of minimizing his risk and making the deal more attractive.
#3;Also, can I bring my own past losses into the llc as an asset?
#1;I guess not really. The IRS does not recognize the limited liability company as a distinct form of business organization for tax purposes. Instead, an LLC(with two or more members) is generally treated as a partnership for tax purposes. For this reason, an LLC must file Form 1065 and Sch K-1 as if it were a partnership. Although the IRS does not treat partnerships as separate taxable entities, it does require partnerships to supply the IRS with information about its finances. As to the income tax, there probably won't be an entity-level income tax with the entity of MMLLC. Instead all the relevant attributes would flow directly to the returns of partners. Partners need to report their share of profit and loss on their individual tax returns on 1040.As to the self-employment (SECA taxes) taxes, individual partners probably will be subject to higher SE taxes because income from a partnership (other than the items required to be stated separately, such as cap gains, etc.) is subject to SE taxes and .ALSO, when forming a company, liability is one of the concerns the principles will have, and taxes is another. So, the advantages of forming an MMLLC are that the members are afforded limited liability and have pass-through taxes similar to a partnership.
#2;As mentioned above, a partner's income or loss from a partnership is the partner's distributive share of partnership items for the partnership's tax year that ends with or within the partner's tax year. These items are reported to the partner on Sch K-1 (Form 1065) and on Sch E and on 1040. Losses happen in business. You/your partner(he) shouldn't have to pay taxes on lost money. If you are a member of a partnership, you may wish to deduct losses on your personal income tax return. To do so, you need to know the tax reporting requirements of partnerships and be familiar with IRS rules on reporting tax losses specific to partnerships as well as how to determine your tax basis.UNLEE you voluntarily want to reward in order for him to fully recover his investment loss, you actually , as a partner, do not need to reward in order for him to fully recover his investment loss. Generally, a partner's share of the partnership loss (including capital loss) is allowed only to the extent of the adjusted basis of his (his outside basis in the LLC)partnership interest at the end of the partnership's tax year in which the loss occurred (but before reduction by the current year's loss). This is not necessarily the same as the balance in the partner's capital account. Any excess is allowed as a deduction in later years to the extent that the partner's basis is increased above zero
#3;No; in the first years of opperation it is not uncommon that business costs and expenses are more than taxable income. In other words, you have a loss for the year. Sometimes, the loss qualifies as a net operating loss , and you can take a deduction for the loss on your federal income tax return in other years.However taking the NOL tax deduction isn’t a simple matter. Once you’ve determined the amount of your NOL, you need to figure out when and how to take the deduction. Carryback and carryforward rules, are known together as “carryover” rules. NOLs are designed to help you offset income you had in past years or may have in the future. The idea is to give you the full “benefit” of your loss by letting you reduce your taxable income and lower your tax bill in years where you didn’t suffer a loss.Generally, when you have a NOL at the end of the year (this is called the “NOL year”), then you have to carryback the whole NOL to the two tax years before the NOL year. This is called the “carryback period.” Then, if there’s any leftover NOL after the carry back period, you carryforward the balance for up to 20 years after the NOL year (the “carryforward period”). You can’t deduct any part of the NOL after the carryforward period.You can waive the two-year carryback period and use the NOL for the carryforward period only. This may be advantageous if your taxable income in the past two years was low or if you expect to have a lot of taxable income after the NOL year. To waive the carryback period, you need to attach a statement to your original tax return for the NOL year specifying that you’re waiving the carryback period.As a non-corporate TP, You simply list the NOL deduction as a negative figure on line 21, Form 1040. Also, you have to attach a statement to your return that shows how you calculated the NOL