Hello Everyone,

Here is my current situation, I was wondering if anyone could shed light on what I need to do.

At the end of last year I started an LLC with a partner listed on the certificate of formation but with myself being the primary member.

Shortly after this I became very ill and the partner never really had anything to do with the business.

Over the last 10 months I have been doing very minimal consulting work from home through the LLC.

Tax time is about to roll around and the partner contacted me panicing about having a tax responcibility on the consulting work I did.

Where this partner has never had a hand in the business past the initial certificate of formation, what can I do about this situation.

Obviously things shouldnt have happened this way but some times when fighting a major illness things slip through the cracks, any advise would be greatly appreciated.

This post would have received an answer much sooner if it had been posted in the accounting and tax section of the website.

From your post I get the impression that You and your partner do not want any portion of the LLC's income to be allocated to your partner so the partner does not have to pay any income tax on the profit.

Profits in an LLC are normally allocated (split) between members according to their percentage of ownership. However, if the LLC's operating agreement between partners/members say split it in some other way that is possible unless the LLC has elected to be taxed as a S-corp. If allocating profit is not the answer, then payments to you as "guarantee payments" rather than as profit payments/distributions would solve the problem as there would be no profit remaining to split to the partner. Guarantee payments are normally payments for work (the same as salary/wages without payroll withholding) to a partner before profit is determined or allocated.

You really need to talk to your local tax preparer (before year-end) that can show you the exact method and help with your tax return.