When filing taxes for an LLC-Partnership, what should be done if the earned income varies from that of the partnership share?
For example, if there are 4 members, and $100,000 is earned, their ownership is 25%, but not ever member earned $25,000 as income.
Our operating agreement specifies that each individual partner has 25% shares and voting rights, but our income is distributed based on different circumstances (i.e. how much contribution and work the individual does, and the type of work). Is there any reason why we can't file 4 K-1's for each partner with varying income?
The reason this concerns me is becaues of quotes like this - https://turbotax.intuit.com/tax-tools/tax-tips/Small-Business-Taxes/What-is-a-Schedule-K-1-Tax-Form-/INF19204.html
As a result, the partnership must prepare a Schedule K-1 to report each partner’s share of these tax items. K-1s are provided to the IRS with the partnership’s tax return and also to each partner so that they can add the information to their own tax returns. For example, if a business earns $100,000 of taxable income and has four equal partners, each partner should receive a K-1 with $25,000 of income on it.