Becca Franklin and Suzanne Peterson formed an LLC as co-owners and managers.The LLC made $275,000 after expenses last year.There are no provisions in their operating agreement on how profits are to be split.
-What amount will Becca declare on her income tax return from the LLC?
A)$137,500
B)the full $275,000
C)nothing, because the LLC reports that income and pays the taxes
D)the LLC must retain at least half of the $275,000 and Becca reports half of $137,500

Question

Becca Franklin and Suzanne Peterson formed an LLC as co-owners and managers.The LLC made $275,000 after expenses last year.There are no provisions in their operating agreement on how profits are to be split.​
-What amount will Becca declare on her income tax return from the LLC?​
A)​$137,500
B)​the full $275,000
C)nothing, because the LLC reports that income and pays the taxes
D)the LLC must retain at least half of the $275,000 and Becca reports half of $137,500

Quizplus · Accepted Answer

Since there are no provisions in the operating agreement on how profits are to be split, Becca and Suzanne are assumed to be equal partners and are entitled to split the profits equally. Therefore, Becca's share of the profits would be $137,500, which she would report on her income tax return.

Becca Franklin and Suzanne Peterson Formed an LLC as Co-Owners