1.0Arizona LLC Lawhttps://www.keytlaw.com/azllclawRichard Keythttps://www.keytlaw.com/azllclaw/author/1llclawyer/rich600338<blockquote class="wp-embedded-content" data-secret="mpMTt4BnK3"><a href="https://www.keytlaw.com/azllclaw/2024/08/distributions/">What Is an LLC Distribution?</a></blockquote><iframe sandbox="allow-scripts" security="restricted" src="https://www.keytlaw.com/azllclaw/2024/08/distributions/embed/#?secret=mpMTt4BnK3" width="600" height="338" title="“What Is an LLC Distribution?” — Arizona LLC Law" data-secret="mpMTt4BnK3" frameborder="0" marginwidth="0" marginheight="0" scrolling="no" class="wp-embedded-content"></iframe><script type="text/javascript"> /* <![CDATA[ */ /*! This file is auto-generated */ !function(d,l){"use strict";l.querySelector&&d.addEventListener&&"undefined"!=typeof URL&&(d.wp=d.wp||{},d.wp.receiveEmbedMessage||(d.wp.receiveEmbedMessage=function(e){var t=e.data;if((t||t.secret||t.message||t.value)&&!/[^a-zA-Z0-9]/.test(t.secret)){for(var s,r,n,a=l.querySelectorAll('iframe[data-secret="'+t.secret+'"]'),o=l.querySelectorAll('blockquote[data-secret="'+t.secret+'"]'),c=new RegExp("^https?:$","i"),i=0;i<o.length;i++)o[i].style.display="none";for(i=0;i<a.length;i++)s=a[i],e.source===s.contentWindow&&(s.removeAttribute("style"),"height"===t.message?(1e3<(r=parseInt(t.value,10))?r=1e3:~~r<200&&(r=200),s.height=r):"link"===t.message&&(r=new URL(s.getAttribute("src")),n=new URL(t.value),c.test(n.protocol))&&n.host===r.host&&l.activeElement===s&&(d.top.location.href=t.value))}},d.addEventListener("message",d.wp.receiveEmbedMessage,!1),l.addEventListener("DOMContentLoaded",function(){for(var e,t,s=l.querySelectorAll("iframe.wp-embedded-content"),r=0;r<s.length;r++)(t=(e=s[r]).getAttribute("data-secret"))||(t=Math.random().toString(36).substring(2,12),e.src+="#?secret="+t,e.setAttribute("data-secret",t)),e.contentWindow.postMessage({message:"ready",secret:t},"*")},!1)))}(window,document); //# sourceURL=https://www.keytlaw.com/azllclaw/wp-includes/js/wp-embed.min.js /* ]]> */ </script> A distribution from a limited liability company (LLC) is a payment of cash or property made by an LLC to the LLC’s owners, also known as members. Although state law sets forth certain default rules, LLC members can specify in the LLC’s operating agreement when and how profits are allocated, distributed, and taxed. Distribution Method and Timing Under the default rules provided by most state LLC statutes, an LLC is not required to make any distributions to members before they withdraw from the LLC or it is dissolved. It is prudent for LLC members to create an operating agreement that specifies the method and schedule of distributions. Distributions can be made on a regular basis, such as monthly, quarterly, or at the end of the fiscal year; or based on specific events, such as the sale of assets or the liquidation of a member’s interests. When determining the timing and size of distributions, the compensation needs of members must be considered alongside the needs of the business to grow earnings, cover expenses, and retain sufficient cash reserves. Often, distributions are made to enable members to pay taxes they owe on the LLC’s profits: because LLCs are generally pass-through entities, their members must pay taxes on LLC profits regardless of whether they receive a distribution of those profits. Proportionate versus Disproportionate Distributions Distributions can be made in direct proportion to how much of the LLC each member owns—an amount that is typically based on an owner’s capital contribution to the business. This is not required, however. Although state LLC laws may provide a default rule that members must share income distributions equally regardless of how much each member invested, the owners can override this in the [...]