LLC Distributions

[AgeOfEnlightenmentSCP]

I just didn't know where else to put this question.  I have an LLC - I'm 80% and there are two 10% owners.  We usually make distributions of the profits, but this quarter we all agree we'd like to retire some debt.  We have enough money to retire the debt, and make a partial distribution of the profits, but we are not sure if a partial distribution is proper? Are distributions an all-or-nothing proposition?  The question goes to the CPA soon enough, but he's on vacation after crazy season (understandably so) and won't be back until the end of NEXT week and I was just wondering if anyone here had some knowledge on the topic?

Question again is: can an LLC make a partial distribution of the profits, or are distributions a yes/no, all/nothing proposition?

[mwcpa]

Any limited liability company (assuming it is taxed as a partnership) can distribute profits how ever and when ever it wants provided it is done so in accordance with its operating agreement.  

Be aware that the profit (for tax purposes) may be higher than the cash distributions.

[rangerj]

As stated above the answer to the question depends upon how the LLC has elected (or defaulted) to be TREATED for tax purposes and provisions in the operating agreement (partnership agreement). If it is treated as a partnership the profits are treated as if they  were distributed to the partners and are taxed. The amounts left in the partnership, that is not literally distributed, are treated as an additional contribution to the partners capital account and increases his/her basis in the partnership (LLC). If the LLC opted to be treated as a corporation the answer may be very different. For example, if the corporation pays off the liability of the shareholders (members of the LLC) it would be taxable income to the shareholders. When entering into transactions involving material amounts of money it is best to consult with a tax professional before the transaction rather than afterwards. Note: all 50 states have provisions for LLC and LLP and the provisions vary from state to state. As of yet the movement to get a uniform LLC/LLP code has not yet happened. If you have not consulted with an attorney in your state regarding your LLC and an operating agreement/partnership agreement I would highly recommend you do so ASAP.