Forums: Discussions for entrepreneurs and small business.

I formed a home-based gift-basket business with my sister last November.  We formed as an LLC (with 2 members).  Basically, I put up all the expense and my sister is helping with other resources (other than monetary).  We did not make any profits last year.  I plan on filing the 1065 and then filing the deductions (schedule E) on my individual return.  Since we are a 2 member LLC, technically does she have to file a schedule E also, even if we allocate 1% since she is a member?  Or is it allowable for me just to file it only for myself since I have paid for everything with the start-up?  I thought this would be easy this year - next year I will be employing someone to do my taxes. :)  Thanks in advance!

First, since you`re a partnership you will need to file Form 1065, as you indicated.  Since you sister is also a partner, then 1% (her share of the partnership) of the loss for 2007 will be flowing to her.  Thus, she will receive a K-1 from the partnership, which she will need to report on her Schedule E of her Form 1040.





-------------------------

Gina L. Gwozdz, CPA
http://GLGcpa.com
http://TaxTreasures.com

I would be forcing the 1% because she is my partner, but her contribution has not been financial.  I am wondering if I could claim 100% of the deductions on my schedule E and not have her file anything.  I mean, we made a little money but not really because I spent much more starting up the business.  Or is that a red flag?  Since we are an LLC (partnership), is it imperative she file a schedule E with something on it?  We are just getting going so I wanted to save her the trouble since it would just be going through the motions right now.  She is my partner and will play more of a role soon, but I have gotten everything up and running to this point.

It would depend on what your partnership agreement states.


-------------------------

Gina L. Gwozdz, CPA
http://GLGcpa.com
http://TaxTreasures.com