Expense reimbursement only

by Amie
(Ohio)

Can you just pay a partner for expenses and not an actual compensation fee?
We have just started and have agreed that if we can withhold from paying ourselves for the rest of the year it would be a good way to get extra working capital for the business.

Answer

There is no requirement under the LLC statutes that you pay out profits to the members.

Remember, however, that as the LLC earns profits, those profits will be reported on the members' tax returns, and generate tax liability, so the LLC might want to distribute at least enough of the profits to the members so that they can pay their taxes.