Sam, Sue and several friends want to form an LLC that will be taxed as a partnership. Sam and Sue are planning on working there and two of their friends, Bill and Barb are planning on helping during the holiday season and work maybe 400 to 800 hours each in November and December.
The other 5 friends will be silent partners who will not work there or participate in management.
If the partnership reports a loss from operations, how do the at risk rules and the passive loss rules impact the chance for each of the partners to deduct the loss?
If the year end tax return results in a profit, Sam, Sue and Bill and Barb want to take guaranteed payments of $25 per hour for all their hours worked and then distribute the remaining partnership income or loss to the partners based on their percent ownership. Discuss the tax consequences of doing that. Is there a self employment tax issue associated with this decision?