How to make a distribution from LLC correctly?
Hi everyone,
I live in Phoenix, Arizona and have a rental that is owned by arizona LLC. I have a good problem - quite a bit of cash is sitting in LLC's business account and I would like to get some of that cash out. I haven't done it ever and don't want to take the money out in a wrong way... wanna follow the right procedure legally et cetera... Do I have to pay myself in order to make a distribution? Should I document it in somehow? Can I just get a chunk of cash out?
Thank you
You'll need to talk to an Arizona Lawyer and/or accountant in California LLC tax is what ever you make goes into a K-1 and gets distributed to your income. You can take distributions how ever you want, you're going to pay taxes on it either way. But definitely talk to your accountant first
If you received a K1 you have probably already paid the taxes.
If it's a single member LLC, there's nothing special for you to do to take the money out. You'll pay taxes on the income for the LLC. You don't pay taxes on it again when you take a distribution.
Demjan Van Der Kach
Sean Cole is right here. Assuming that you are the owner LLC, just write a check to yourself. This isn't an expense to your business so you still pay taxes on it (either you already have or you will in 2016) but it is perfectly fine to take a distribution from your LLC.
If there are multiple members in the LLC or some other more complicated structure let me know because the answer might change.
Sole proprietorships, partnerships, LLCs and S corporations are pass-through entities for federal income tax purposes. This means these entities are not subject to income tax. Rather, the owners are directly taxed individually on the income, taking into account their share of the profits and losses.
Every LLC should have an Operating Agreement (you can read more about that here.) While most states do not require an operating agreement, it is advisable to create one. Operating agreements are essentially contracts between the members of LLCs outlining the structure of the business, including - for our purposes - the business’s tax structure. Be sure to check if your state requires that you file your operating agreement.
Past that, you’ll need to file Form 1065 with the IRS. The IRS uses this to ensure each LLC member is properly reporting their income from the LLC. You should also give each member a Schedule K-1 so everyone has, in writing, their share of the profits and losses.
After this, every member of the LLC will be taxed personally on their 1040 tax return.