All,

Thanks for taking a look at this. I have an LLC that I established in 2002 as an occasional thing for contract work that I have done while working full time in other areas. In 2006, I was unemployed and attempted (failed) to create a business full time out of it with certain capabilities. In doing so, I got a line of credit and credit card to pay for the company processes and pay myself (living expenses).

Throughout 2006, I made $0 paid to the LLC (As I said, failed attempt), however incurred a large amount of debt -- much of which was used as salary for myself from the LLC. I'm currently trying to figure out how this would be filed for income tax purposes or if I need to do that at all as its a pass through situation for taxation anyway.

Help would be appreciated in finding documentation or hints on how to do this. I haven't been successful thus far.

Sincerely,
Philippe

__________________
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Philippe Mesritz, President
Internet Services Unlimited, Inc
New Direction Marketing
Representing: TMS Marketing and Sales Software

I found this online I hope it helps:

How LLCs Are Taxed
Like the owners of sole proprietorships and partnerships, LLC owners report business income and losses on their personal tax returns.

An LLC is not a separate tax entity like a corporation; instead, it is what the IRS calls a "pass-through entity," like a partnership or sole proprietorship. All of the profits and losses of the LLC "pass through" the business to the LLC owners (called members), who report this information on their personal tax returns. The LLC itself does not pay federal income taxes, but some states impose an annual tax on LLCs.

Income Taxes
The IRS treats your LLC like a sole proprietorship or a partnership, depending on the number of members in your LLC. If you've already done business as a sole proprietorship or partnership, you're ahead of the game because you know many of the rules already. If not, here are the basics:

Single-Owner LLCs
The IRS treats one-member LLCs as sole proprietorships for tax purposes. This means that the LLC itself does not pay taxes and does not have to file a return with the IRS.

As the sole owner of your LLC, you must report all profits (or losses) of the LLC on Schedule C and submit it with your 1040 tax return. Even if you leave profits in the company's bank account at the end of the year -- for instance, to cover future expenses or expand the business -- you must pay income tax on that money.

Thanks. That's the part that I understand and have proceeded under in the past. Income directly passes through -- the confusion that I'm currently having is how that works if its not actual income to the LLC, but was used as a wage to myself.

I.e. $10,000 in loans to the LLC to pay my salary of $9,000 plus expenses -- and then $0 income for the LLC.

__________________
--
Philippe Mesritz, President
Internet Services Unlimited, Inc
New Direction Marketing
Representing: TMS Marketing and Sales Software