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Taxes Paid by an LLC

Our company paid the taxes for its members.  Should this be booked against their equity or can we take this as an expense?

Taking it as an expense can help us with our taxable position.  I have always worked in a corp and never dealth with an LLC.  Any insight would be appreciated.

Answers

Chris Shumate
Title: Accounting Manager
Company: Dominion Development Group, LLC
LinkedIn Profile
(Accounting Manager, Dominion Development Group, LLC) |

It isn't an expense for Federal tax purposes. If the taxes are paid to a state then yes, the taxes are an expense. For instance, in Tennessee we have Franchise and Excise taxes on the revenue and assets of the company. These are expenses because it is a cost of the business. If it is for Federal taxes, you could set it up as a receivable from the partner, or use it to decrease the partners basis. Definitely not an expense for Federal purposes.

Best of luck! I am not a CPA, but work for an entity that is comprised of to date 27 LLC/LP/GP entities. Welcome to the world of LLCs!

Robert Rochester
Title: VP & CFO
Company: Edcor Data Services LLC
(VP & CFO, Edcor Data Services LLC) |

When you say the LLC "paid the taxes for its members", I assume you mean Federal or State income taxes. If so, these taxes are a "personal" expense of the members - not an LLC entity expense. If the LLC paid these taxes on behalf of its members, then it seems to me that you have an equity distribution to record.

Patricia Hickey
Title: Chief Financial Officer
Company: CCS
(Chief Financial Officer, CCS) |

This should be charged against the members equity accounts. It is not an entity expense. We have the same situation.

Robert Breedlove
Title: CFO
Company: Xpert Exposition Services
(CFO, Xpert Exposition Services) |

Payment of federal taxes by an LLC on behalf of its members is a distribution - effectively the same as if cash were distributed and used to pay the liabilities by the members themselves.

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