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Tax Law (Questions About Taxes)/Question regarding taxation of LLC

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Question
I have a multi-member LLC treated as a partnership. My question is would it be possible for a member to withdraw more than their allocated percentage of profits they pay on come tax time? Is paying taxes on allocated  profits completely separate from an owner withdrawing money from the bank account? Say we bring in $100,000 and I pay taxes on 30% of the profits. Could I theoretically withdraw $35,000 over the period of year without problems? Are profit allocation taxes the same as self-employment tax? And with any withdraws, should it be marked as a member distribution?

Thank you

Answer
Scott,

If a member of the partnership withdraws more than his allocated share of the profits, the excess is treated as a withdrawal of capital and not taxable. If he withdraws more than his capital balance it is a taxable capital gain. A members share of profits is subject to income and self- employment taxes.

Hope this helps.

John Stancil, CPA

Tax Law (Questions About Taxes)

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John Stancil, CPA

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I can answer questions on personal income taxes, partnerships, and some corporate income taxes. I can deal with some state tax questions. Limited gift and estate tax questions. I am also familiar with ministerial and church tax reporting issues. I am Professor Emeritus at Florida Southern College. Sales taxes and property taxes are state and local issues so I am not likely be be able to give you an in depth answer on those types of taxes. I have maintained a CPA practice, specializing in tax, for over 35 years. I am a member of the National Association of Tax Professionals, The Florida Insititute of CPA's, The NCPE Fellowship. In addition I am a Certified Mentor for SCORE. Visit my website at www.mybaldcpa.com. I also offer seminars and consultations to churches and clergy on their tax issues at www.churchtaxsolutions.com Also visit my blog, www.thetaxdocspot.com. I am listed on Tax Connections at https://www.taxconnections.com/profile/John-Stancil/12258973 Prepare and file your own taxes at www.1040stancilcpa.com

Experience

I hold a doctorate in Accounting, and am a CPA. My certifications of CIA, CFM, and CMA are inactive. I passed all certification examinations on the first attempt, and received honorable mention for my scores on the CIA exam. I have operated a CPA firm for over 37 years and have taught accounting and tax at the college level for over 35 years.

Organizations
FICPA, NATP, NCPE Fellowship, Lakeland Business Leaders

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The CPA Journal, Florida CPA Today, Green Consumer, Green Business, Global Sustainability as a Business Imperative, Palmetto Review, NATP TaxPro Quarterly, Mustang Journal of Finance and Accounting.

Education/Credentials
DBA University of Memphis MBA University of Georgia BS in Accounting Mars Hill University

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