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I own a small publishing company and occasionally publish my own books. I want to track royalty expenses on the products I've written, so my plan was to pay myself royalties, book it as a royalty expense and then issue myself a 1099 for the royalties paid, so that my taxes balance (the LLC profits offset by the royalty expense would be balanced because the 1099 would add that amount back to the profits when I report my total profits). I'm the sole owner of the LLC and it's a disregarded entity for tax purposes.

Is this appropriate? Is there another way I should handle it? Maybe use a non-posting account?

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Since its an LLC, a disregarded entity, you won't have anything to balance. LLC income is your income.

You may do that, but I think it just adds to the accounting costs and complexity. You'll be filing a 1099 with your own (through LLC) EIN as the payer and your own again SSN as the payee, without any benefit I could think of.

If you want to track - just use a separate account in your books for this money, it doesn't have to be tracked through IRS necessarily.

That's my opinion, but I'm not a CPA or a professional in this field, I might be wrong.

  • There would be something to balance, because booking royalties as expense would reduce the LLC's reported income. It'd have to be added back for IRS reporting via a 1099. You don't think it'd be more complex to track another royalty account on the books than to simply print out another 1099? – Slick23 Jan 8 '12 at 23:33
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    Well, if you have a whole bunch of these, then adding one more to the list doesn't seem to be a big deal. Even if its to yourself:-) The LLC is a separate (even if disregarded) entity, so there's no problem with writing yourself a check, paying yourself royalties or even paying yourself interest on a owner's loan to the LLC. As long as you report it in your personal income as well. – littleadv Jan 9 '12 at 4:07
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    @slick23 - say the LLC had $50 in income, nothing else. But it claims an expense for the $50 it pays you. Now the LLC has no income to distribute but you have $50 just as if the LLC had it. As littleadv stated the LLC is a disregarded entity. – JTP - Apologise to Monica Nov 14 '13 at 3:17
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As long as you accurately report your total profits, it's okay. That means whatever is booked to royalty expense and paid to yourself by check, will need to be reported by you as income to the IRS -- because in booking the expense, you're reducing the total profits of the LLC.

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If your LLC is treated as a corporation, as mine is, it is a separate entity. It's income in not necessarily your income.

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