Our business involves a professional LLC taxed as a partnership where the two partner entities are S-Corps owned by individuals. The LLC pays guaranteed payments to the member S-Corps, based on a formula that accounts for the efforts towards the partnership contributed by the S-Corps through their professionals. Each of the member S-Corps also generates its own professional fee income directly. A management corporation provides back end services to all three of these entities, including bookkeeping.
I've reviewed the discussions concerning guaranteed payments on this forum, which were very helpful, and obtained guidance from our tax CPA. I am stuck on one last thing which seems very minor but important nonetheless. In categorizing the guaranteed payments received by the member S-Corps, would these be categorized as "Fee Income" (operating) or "Investment Income" (other income). Or something else?
Any advice or recommendation would be appreciated.
