Initial expense/compensation in 3-person (33%) TX LLC.

[Account Closed]

Hello all,

I'd really appreciate a few thoughts from this amazing community. I'm in need of some help on the best way to manage the rehab costs of a new property within a three-person LLC/partnership. This is the first property for a newly formed family partnership.

We have a 33% LLC in Texas used for SFRs. The issue I'm having with this new entity is the operations components exceed my scope of knowledge.

I'm seeking how best to manage the disproportionate expenses during the initial phase of rehab. I know that if one person is doing more of the work their split could be disproportionate to reflect this. However, this is a family partnership and I want to keep the equity split identical. How/can I compensate the one doing 20-30 hours of labor. Our LLC has a small business bank account: so, just pay them an hourly rate from the bank account? Guaranteed payment? Better way?

 I'm running in circles thinking about the different options and know just enough to over think this, I fear.

Thanks for any help you can provide!

[Basit Siddiqi]

@Account Closed

If a member/partner will be paid for some services outside of his right to earn a 33% profit/loss percentage in the LLC's income - he can be compensated via guaranteed payment.

You will not be required to issue him a 1099. However, the guaranteed income portion will be required to be reported on his K-1 issued to him.