Legal Question in Wills and Trusts in Florida

LLC is a pass-through entity and doesn�t pay tax on any of the income/gain. It passes to the LLC members. Even though the income may be passed through to the members the cash may still remain in the LLC. This is how the CPA for the PR, informed us that we owed money on our taxes we never received. Is this legal, can you keep the money in an LLC and the PR spend it, and tell the others they owe the tax on the money they actually kept and spent? Is this legal or fraud? Then to add, they did not get the estate waivered, so now they've transferred back to the trust! Wow. Thank you.


Asked on 2/05/14, 4:03 pm

1 Answer from Attorneys
Thomas Shigo The Shigo Law Firm, P.A.

Yes, a member of an LLC is taxed on that members percentage interest of the LLC income. Each year the LLC issues a K-1 to each member that details the member's percentage of income and expenses (deductions). The member pays tax on their share of income even if the LLC did not distribute the net income to the member. It is common (but not required) for the LLC to make a distribution to the member sufficient to cover the taxes resulting from the net income as stated in the K-1. I can't comment on the remainder without a lot more information. However, there is something curious. Unless the LLC operating agreement states otherwise, the death of a member is often "an event of withdrawal" as to that member so the only thing that the PR should be doing is securing the redemption/liquidation of the deceased member's interest in the LLC.

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Answered on 3/01/14, 6:51 am


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