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Distribution of income to partners

Forum|Forum|7 years ago
December 11, 2018
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A mangement LLC company is owned by to LLCs. The management company gets a commission income of 100,000$. I register this transaction as an income. The management company distribute the income to the LLCs partners (50/50). How do I register the deposit to the LLC partner? If I register as an income again I am afraid that when I give the books to the accountant I will pay double taxes. Any suggestion? Thank you

QuickBooks Desktop

Best answer by Rustler

LLC is not important, how the LLC is taxed for federal income is the key. If the LLC is taxed as a partnership (form 1065) then you book income the company makes during the fiscal year

At the end of the year the company has made a net profit (hopefully), on the first day of the new fiscal year QB moves that Net profit to the retained earnings account.

Then you do a journal entry to distribute net profit to the partners

debit RE for the full amount in the account
credit partner 1 equity for 50%
credit partner 2 equity for 50%

A partnership does not pay income taxes, the partners receive a form K-1 which is created as part of the form 1065. That K-1 provides each partner with the amounts of income and expenses for the business allocated to the partner and he uses that information to fill out his personal income tax return.

Income during the fiscal year is not "deposited" to the partners

If the partners need money from the company then the company writes them a check and uses partner equity drawing as the expense for the check.

I recommend you have the following for owner/partner equity accounts (one set for each partner if a partnership)

[name] Equity
>> Equity
>> Equity Drawing - you record value you take from the business here
>> Equity Investment - record value you put into the business here

When you clear (roll up) RE to equity, you do journal entries to roll up drawing and investment too

IF the LLC is taxed as a c- or s-corp, none of the above applies

LLC is not important, how the LLC is taxed for federal income is the key. If the LLC is taxed as a partnership (form 1065) then you book income the company makes during the fiscal year

At the end of the year the company has made a net profit (hopefully), on the first day of the new fiscal year QB moves that Net profit to the retained earnings account.

Then you do a journal entry to distribute net profit to the partners

debit RE for the full amount in the account
credit partner 1 equity for 50%
credit partner 2 equity for 50%

A partnership does not pay income taxes, the partners receive a form K-1 which is created as part of the form 1065. That K-1 provides each partner with the amounts of income and expenses for the business allocated to the partner and he uses that information to fill out his personal income tax return.

Income during the fiscal year is not "deposited" to the partners

If the partners need money from the company then the company writes them a check and uses partner equity drawing as the expense for the check.

I recommend you have the following for owner/partner equity accounts (one set for each partner if a partnership)

[name] Equity
>> Equity
>> Equity Drawing - you record value you take from the business here
>> Equity Investment - record value you put into the business here

When you clear (roll up) RE to equity, you do journal entries to roll up drawing and investment too

IF the LLC is taxed as a c- or s-corp, none of the above applies

My accounts are set up as you suggest in quickbooks. Not sure how to assign the distributions accounts to a tax line to get them to show up properly on the K-1 when quickbooks info is imported into turbotax.

A

Anonymous

Hello, rha9.

To walk you through on how to show up accounts on the K-1, I’d recommend contacting the TurboTax support. They’re more knowledgeable and well trained about their products functionality.

Here’s how to reach them:

Visit this link: https://support.turbotax.intuit.com/contact/
Choose a product and type in your concern.
Scroll down and click the Get the phone number button.

Comment down below if you have other questions with QuickBooks.

"The management company distribute the income to the LLCs partners (50/50). How do I register the deposit to the LLC partner?"

I think you are asking about a Subsidiary, or Wholly-owned or Sub-entity relationship. In that case, the initial entity earned Income, the Payout is Distribution or Draw from Equity, and the Deposit to the other LLC is an Equity deposit.

The other LLC will get a full report from tax preparation for income and expense. Right now, all you have is some Banking.

You should always review this with your CPA, of course. We are doing our best to understand what you asked, without access to any further details.