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I am very confused on how to set up a partnership and guaranteed payment in quick books with an LLC company. Everything I am reading is telling me different. I need a step-by-step on how to do this.
Step 1. Create your set of 4 equity accounts for all members. 1 overall non-posting, 3 sub accounts>equity, draw, contribution
Step 2. Add a company Expense account for guaranteed payments. These are business deductible, and reduce the pass through profit (or loss) to all members, BUT will be reported to member on their K-1in a separate line from their profit or loss from t he enterprise.
Step 3. Pay receiving member based upon operating agreement - work performed or loan interest
Step 4. At year end your tax CPA will record the proper application of payments on the 1065 and K-1
Tax reporting is separate from bookkeeping and as a reminder, Quickbooks is accounting software, not tax software. There is no underlying need to absolutely record each and every item to the exact area it will land on the tax return. Tax returns are the most important report for your business but only goes hand in hand with actual operating P&L and Balance Sheet. There are always, always, always expenses that are allowed from a business standpoint that are disallowed at tax time
does each partner need 3 different equity accounts, or is it 3 equity accounts over all.
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