Becca Franklin and Suzanne Peterson Formed an LLC as Co-Owners

question 67

Multiple Choice

Becca Franklin and Suzanne Peterson formed an LLC as co-owners and managers.The LLC made $275,000 after expenses last year.There are no provisions in their operating agreement on how profits are to be split.​
-What amount would Becca declare on her income tax returnif Becca and Suzanne had formed aSubchapter S corporationand there was no provision in theiragreement on how profits are to be split?

• A)​$137,500
• B)​the full $275,000
• C)nothing, because theSubchapter S corporationreports that income and pays the taxes
• D)theSubchapter S corporationmust retain at least half of the $275,000 and Becca reports half of $137,500

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Definitions:

Fixed Cost

Expenses that do not change in total over the short term, regardless of the level of production or sales volume.

Flexible Budget

A flexible budget adjusts based on changes in the volume of activity or other relevant factors. It allows for a more accurate comparison of budgeted versus actual costs under varying levels of activity.

Occupancy Expenses

Occupancy expenses are costs associated with renting or maintaining premises for business operations, such as rent, utilities, and property taxes.

Client-Visits

Meetings or interactions with clients, often used to build relationships, assess needs, or deliver services.