I'm afraid you've been misinformed. The income you report on your personal return isn't affected by how much---or little---LLC funds the owners withdraw from the company. You and the other two owners will each report your respective share of the LLC's net profit (or loss) for the year.
You didn't mention your profit- and loss-sharing ratios, but let's say it's 1/3 each. Suppose the LLC had 1,200 of net taxable income for the year. Then each owner would report 400 on his / her personal return as income. Whether you pull cash out of the LLC, or leave it in, is irrelevant.
If on the other hand the LLC has a loss of 900 for the year, then each owner reports a loss of 300 on his / her return.
You do NOT pay tax on money initially invested (or invested into the LLC sometime later, for that matter).
If you choose to prepare your LLC's tax return without professional assistance, proceed with caution. Study the instructions to Form 1065 very carefully, as LLC (partnership) tax rules can be confusing. Also, you'll need to check in with CT's revenue department to see what income tax return is required at the state level. (From a quick glance at their website http://www.ct.gov/drs/site/default.asp, it appears that an LLC with income from within CT must prepare a Form CT-1065 tax return.)
Thanks for the quick reply. We currently have no income and only have incurred expenses. The only money we have currently is the remainder of what we initially invested. I am assuming with this scenario we would actually be declaring a loss because we have spent approximately $800 without any income (even though we still have $700 remaining from our initial investment). Am i correct with this line of thinking?
Generally, yes....to the extent that the $800 went out for deductible expenses.
Thank you very much for the clarification! I appreciate it!
I am one of three owner who started a CT LLC in 2009. We invested approximately $500 each for a total of $1500.
End of year we have some money left over that was not spent. I am aware no money can stay in an LLC at the end of the year so it has to be passed out to the owners and paid on their tax returns. I am also aware we can actually leave the money in the LLC but still need to declare the taxes on our personal returns.
Do we have to pay taxes on money that we initially invested? I am trying not to involve a professional because we are on a very lean budget so far!
Any help would be appreciated.