Dividing Cash Flows In A LLC
I have heard it is possible to divide income and expense among the partners in a LLC disproportionately to their ownership interest or their capital contributions. Has anybody here done this? What is the appropriate section of the code and how does such a thing get written up.
I'm forming a LLC around a deal I am doing where there is a passive investor who will get a 10% preferred return before we split profits above that evenly.
I have an LLC which I own 50%. According to our partnership aggreement I get 7.5% off all sales as a management fee. After all expenses are paid including the 7.5% we split the profits/losses according to ownership. The LLC sends me a 1099 for the 7.5% and a k1 for the LLC.
Check with your accountant but something similar may work for your passive investor.