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 would Becca declare on her income tax returnif Becca and Suzanne had formed a general partnership and there was no provision in their partnership agreement on how profits are to be split?
A)$137,500
B)the full $275,000
C)nothing, because thegeneral partnershipreports that income and pays the taxes
D)thegeneral partnershipmust 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 would Becca declare on her income tax returnif Becca and Suzanne had formed a general partnership and there was no provision in their partnership agreement on how profits are to be split?
A)​$137,500
B)​the full $275,000
C)nothing, because thegeneral partnershipreports that income and pays the taxes
D)thegeneral partnershipmust retain at least half of the $275,000 and Becca reports half of $137,500

Quizplus · Accepted Answer

If there are no provisions in the partnership agreement on how to split the profits, the general rule of equal sharing applies in a general partnership. Therefore, Becca would declare half of the $275,000, which is $137,500, on her income tax return.

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