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Boost QBI: Pay Partners and LLC Members Preferred Returns

March 15, 2021

Let me ask you two important questions…

  • Do you operate your business as a partnership, or as an LLC that’s treated as a partnership for federal income-tax purposes?
  • Are you compensating yourself and your fellow partners as LLC members with so-called “guarantee” payments?

Then here’s some advice I urge you accept…

Consider compensating yourself and your partners with “preferred returns” rather than with “guaranteed” payments.

This will provide you with bigger tax breaks!

Thank Section 199A for this!

~~~~~~~~~~~

First, a few definitions.

A “guaranteed payment” is a payment made by a partnership to a partner without regard to the partnership’s net income.

  • Guaranteed payments are not counted as QBI.

A “preferred return” is a preferential allocation of partnership net income to a service-providing partner before the remaining partnership net income is allocated to all partners.

  • Preferred returns are counted as QBI.

So should you make the move to
a preferred return strategy?

For 2018-2025 you, as an individual partner, can potentially deduct 20% of your share of a partnership’s QBI.

To maximize QBI deductions for you and the other partners, consider replacing guaranteed payments, that don’t count as QBI, with preferred return payments that DO count as QBI. This will put more money in your pocket!

NOTE: In this short email, we’ve only scratched the surface of this important subject.

To get the full story explained in easy-to-understand language, don’t miss this unique opportunity…

Read the full article:

“Boost QBI: Pay Partners and
LLC Members Preferred Returns
”

Filed Under: Tax Planning

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