On the 1065 it asks the partners’ shares beginning/ending profit, loss and capital percentages. I understand these need to be reflected in the LLC agreement. Can a partnership change these percentages in the agreement, and thus reported on the 1065 at will? So with all partners agreement, we could at the beginning of the year change these to any amounts we choose?
Partners can decide among themselves to change the allocation percentages, but those changes must have “substantial economic effect.” A partner’s share of taxable income cannot become smaller unless that partner’s share of the economic profits becomes correspondingly smaller. Rules in this area are highly technical and beyond the scope of what we can deal with here.
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