chris comish’s income. with “members” for tax...
TRANSCRIPT
Future LLC Prospectus
1
Background
The City of Shamballa* Social Network at www.cityofshamballa.net is a growing social
network targeting the New Age and Reiki/energy healing communities. Currently, Chris Comish,
the founder of the City of Shamballa Social Network, runs the network under sole proprietor
status. Income from the network and his book revenue are combined under sole proprietor
income. In the future, all income generated through the website is planned to be re-organized
under a LLC (Limited Liability Company), while the book revenue will continue to remain
100% Chris Comish’s income. The following prospectus is a business plan for the Multi-
Member LLC which will elect to be taxed as a partnership and “partners” are interchangeable
with “members” for tax purposes. This document is a draft and may change once the articles of
formation and operating agreement are officially established. This document assumes a Virginia
based LLC but the tax documents and process may change if the LLC is formed in a different
state (depends on the residence of Chris Comish).
Current Balance Sheet
Current Annual Income generated by the Network is as follows:
Current Annual Expenses of the Network are as follows:
Sales
Member Paid Access
Member Donations
Services
Trademark Licensing
Advertising Revenue
Website Directory Listings
Expenses
Hosting
Domains
Advertising
Trademark Attorney Fees
Charitable Donations
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The LLC will be seeking Members
The LLC formation offers a return on investment for LLC Members. Both current members of
the website and outside members can invest into the LLC. LLC Membership is open to both US
Citizens/Resident Aliens and Non-US/Non-Resident Foreign Citizens. LLC Members can be
Active Members (working for the LLC) or Passive Members. Active Members receive monthly
payments in addition to quarterly distributions. All LLC members receive quarterly distributions
of profit (% of profit is based on each members capital contributions).
LLC Operation
Chris Comish, will continue to operate the Network and thus will have the highest membership
stake in the LLC. The LLC will be Manager managed. Chris Comish will be the Member
Manager. He will remain the principal party for the LLC and manage the operations. In case a
company wishes to buy out Chris Comish, they must buy out all members in the LLC including
Chris Comish to become new managers. Additionally the LLC exists as long as there is a
member to replace Chris Comish. The second highest stakeholder in the LLC has first rights if
Chris Comish leaves the LLC (death or personal reason) and then the order of precedent will
follow based on the size of the stakes.
The LLC will have articles of formation and an operating agreement in the future. The LLC will
have its own business bank account. Chris Comish, the LLC manager, will receive guaranteed
payments out of the income of the LLC (treated as LLC business expense) before member
distributions are paid. His guaranteed payment will come only out of the profit of the LLC. The
payments will be set and defined- initially 60% of monthly profit until other active members
share in the duties of the LLC.
Once the LLC is established, active LLC members will be established and will take on
“employee” functions. Active members will not be “employees” but will receive monthly
guaranteed payments in which they pay their own estimated taxes on (30% upfront quarterly to
IRS and/or state, then get reimbursed if necessary following tax year). Chris Comish’s
guaranteed payment will then adjust from 60% profit to pay the LLC Active Members out of the
60% profit.
The LLC Manager Chris Comish can adjust the Articles of Formation and Operating Agreement
without Member input (this includes submitting tax returns on LLC’s behalf and members’
behalf only in the LLC state (with notification to member by sending to member)) to continue
the success of the LLC UNLESS the adjustments are regarding the member capital contributions.
Member capital contribution adjustments (i.e. pay in/pay out process and buyout procedures)
require majority vote to change the Operating Agreement. The Member base of the LLC will be
capped at 20 initially. Once more members become active members and the current active
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member’s duties transferred to more members, the number can increase. The Member base is
20% active and 80% passive initially. Example if 10 active members share the duties, then the
total member base can grow to 50 (40 passive members). Each member added increases the
equity of the LLC.
Member Categories
There are three types of Member categories. US Citizen, US Resident Alien, and Non-Resident
Alien (Foreign member living outside US).
Active Members (4 initially)
Active members receive monthly guaranteed payments plus quarterly distributions. Guaranteed
payments are paid monthly via PayPal unless the Active Member elects for EFT payment (US
citizen or resident alien members only).
The following is a planning table for the Active Members and their job descriptions (this is a
table if Active Members are established; if no other members are active Chris Comish’s payment
will be 60% of profit):
Chris Comish: Full-time. LLC manager, business management, finances-
distributions/guaranteed payments to members, capital contributions and member applications
tracking, taxes, licenses, attorneys, contracts, paid access. 20% of profit as guaranteed payment
monthly paid at beginning of following month. Highest stake in LLC.
Member A: Part-time. Book editing and Book publishing. Epub sales and publisher tracking.
Member must have active accounts at Lulu.com, Amazon Kindle Development Platform, Google
books & e-books, and the Scribd Store. (Must be US member (Citizen or Resident Alien) due to
tax laws). 20% of profit as guaranteed payment monthly paid at beginning of following month.
Second Highest Stake in LLC.
Member B: Part-time. Website lead administration, member of the month updates, approving
new members, suspending spam members. Member B is also the marketing member. Member B
also regularly updates City of Shamballa Facebook page and Facebook group and continues to
publicize City of Shamballa/Invites new members. Manages Website Directory listings and
Advertising Sales. Creates and manages Email Newsletter via Mail Chimp program. Manages
City of Shamballa contact email address. (Can be Foreign/Non-Resident Alien member). 15% of
profit as guaranteed payment monthly paid at beginning of following month. Non-Resident
Alien/Foreign members will need to submit form W8-BEN and certify their taxation status so
they can be relieved of 35% taxation on guaranteed payments and distributions. Third highest
stake in LLC.
Member C: Part-time. Merchandise retail via Amazon Seller Central, CafePress & Zazzle.
Manages retail account and notifies Chris Comish if inventory needs to be resupplied. Sends
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inventory to retailers as necessary. Creates products at retail sites. (Must be US member (Citizen
or Resident Alien) due to tax laws). 5% of profit as guaranteed payment monthly paid at
beginning of following month. 4th highest stake in LLC.
Non-active Members (16 initially)
All other Members of the LLC will be “investors” in the LLC. This entitles Members to
quarterly distributions (sharing of the LLC profit) based upon their membership share. Each
member (US Citizen/Resident or Foreign/Non-Resident will receive a Schedule K-1 tax return
by March 1st which documents the Member’s Capital and Distributions) for the filing of their
own tax returns.
Foreign (Non-Resident) members will have 35% of their distribution withheld by the LLC in
taxes for remittance to the IRS. There are no 1042-S filings for LLC member (partnership)
distributions. Those forms are only for the share of individual royalties (see City of Shamballa
website http://www.cityofshamballa.net/page/sell). Foreign (Non-Resident) members may be
able to claim relief of 35% tax by filing form 8804-C with the LLC when they apply for
membership. Foreign/Non-Resident members file form 1040-NR or 1040-NR-EZ form by April
15th with the IRS if they wish to receive any tax refunds from the IRS.
The LLC will withhold taxes from foreign members (Non-Resident) before sending the member
a distribution. US (Citizen or Resident) LLC members will pay 30% (self employment tax +
social security/Medicare/federal/state tax on their own after receiving the distributions, the LLC
will not remit tax for US members. US (Citizen or Resident) Members will pay quarterly
estimated taxes on their income to ensure they pay the IRS).
New Members
Prospective Members will receive a New Member Application for review before they invest in
the business. The requirements to become an LLC member are:
1. Submit an application- Name, Resident Address, Mailing Address, Nationality, US Citizen,
US Resident, or Foreign/Non-Resident. US members (Citizen or Resident) include your
distribution/capital withdrawal preference: EFT payment to your bank account or sent to your
PayPal account. U.S. Members (Citizen or Resident) provide form W9 to LLC for tax reporting.
Note to Non-Resident/Foreign Members: Foreign/Non-Resident members are paid only via
PayPal. Foreign members provide form W8-BEN and W8-ECI to LLC for tax reporting. Foreign
members also certify tax status (using form 8804-C) to provide to LLC to lower tax rates on
income. Foreign Members provide a W8ECI form for any distributions income not covered
under form W8BEN. Foreign members must have US TIN (file form W7) to get tax treaty
benefits. If no tax ID is filed, tax is 35% on all income for foreign members (withheld by LLC
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before receiving a distribution or payment). Foreign members file 1040-NR or 1040-NR-EZ
form by April 15th to get refunds on tax witholdings.
All documents are emailed to Chris Comish (com5corp(at)yahoo.com)
2. Have a PayPal account Also each member provides a signed one year minimum agreement.
3. Contribute Capital. Capital is never taxed unless it is increased through stock gains, and then
the capital gains become income. Capital contributions are returned tax free if requested by
member upon withdrawal but gains through stock gains will be taxed first before return to
member. There is no minimum capital contribution and no timeline for contributions, members
contribute when they are able.
Member buyouts
Any Member can buy out other passive members of the LLC to receive higher stakes by
contributing more capital and also paying for the bought-out passive member’s contributions
(leads to more LLC equity). The buying out of active members requires adjustments to the
operating agreement and majority vote. Tracking of all members capital and buyouts will be
managed by Chris Comish.
Leaving the LLC
Members are required to be passive members or active members for one year. After that period
they can remain in the LLC and their stake will automatically increase (due to stock market
gains) or they can leave. If members leave they do not receive distributions any more, but they
do receive a return of the contributed capital plus capital gains on the sales of stock. Other
members can contribute capital to increase the LLC’s equity and their personal stakes at that
time.
Member Benefits
A membership share is based upon the Member’s capital contributions. $1 is equal to 1
Membership Share. No member may have a higher stake in the LLC than Chris Comish
regardless of their contributions- their capital contribution cap will be $1 less than Chris
Comish’s contributed capital. The Member that contributes the most capital will have the second
highest stake, unless one of the Active Members controlling the second highest stake declines the
buyout. Buyouts of active members require majority vote to confirm new member is capable of
controlling that stake in the business (i.e. if they choose to remain in the business they must
contribute their services or else completely buy the whole LLC (all of its income and debt and
become new management). Changes to the Operating Agreement (or if necessary Articles of
Formation) will be voted upon by the members by a quorum (Majority Vote). Votes will
typically be done via email after receiving the updated document. Members have limited liability
and their personal assets are protected against LLC debts.
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Capital Contributions Account (part of LLC checking account- accounted in Quickbooks)
The initial investment into Membership following receipt of application is an initial capital
contribution. Capital contributions are paid into the LLC‘s PayPal account. Capital contributions
are equity in the LLC and not to be used for expenses or guaranteed payments. Capital
contributions are the member’s stake in the LLC. Members can contribute more capital following
their initial investment at any time. Every capital contribution increases the member’s stake.
After the Member’s initial investment, there is no requirement to contribute more capital, but the
Member can if they wish. There are no minimum member contributions. If the LLC is in danger
of not retaining profit, a Member may loan their share of contributed capital to the LLC using a
promissory note until the LLC repays the Loan. In such a case, the LLC signs a promissory note,
a legally binding contract stipulating the terms of the loan agreement. It is not uncommon for a
provision within the promissory note to assign the lender an interest in the assets of the business
(usually the percentage of the member’s share that was loaned) should the LLC default, referred
to as a secured loan. During the Loan period the Member still retains their LLC member share
percentage.
The Capital contributions are accounted for as such:
50% is cash and goes into the LLC bank account (as security/hedge- accounted under capital
contributions) and the remaining 50% is invested (through the LLC’s brokerage account
managed by Fidelity or Scotttrade) into large cap and mega-cap stocks offering a return on
investment. The stock spread will not change unless a stock loses more than 20% of value, and
then another stock will be chosen to replace it. As the stocks increase in value so does the
member’s stake. The member’s stake is adjusted for stock gains on an annual basis. If a member
is a member for a long time, they are rewarded with increased stake due to the gains in the stock
market.
All capital contributions (including cash capital and stock gains capital contributions) are tracked
for each member by Chris Comish and stakes (member ownership %) adjusted annually.
Members must agree to a minimum of one year membership in the LLC. This will keep the
LLC’s equity base stable.
After the one year holding period, a member can decide to leave the LLC. Leaving the LLC
causes a shift in the equity of the LLC and is damaging to its asset base. But there may be
personal reasons why an LLC member can no longer be a member. An LLC member withdrawal
constitutes a complete capital contribution repayment. The returned cash capital contributions are
non-taxable as income, since they never were part of the LLC’s income statement and did not
gain.
LLC members also receive their gains in stock investments. Stock gains are taxable income; they
will show up on the Withdrawing Member’s Schedule K-1 which will eventually be reported on
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their 1040 Schedule C business income (foreign members will have taxes withheld before
payment and do not need to file unless they want to). All investment gains are based upon the
member’s stake in the LLC. For example if a member has a 10% stake, and then withdraws their
stake/membership, they are entitled to 10% of the LLC’s capital (whatever cash capital
contributions the member made) plus the gains of the sale of stock of their capital. Investment
gains, once the stocks are sold, and removed from the capital account (equity) into the
distributions account (profit). The distributions of the gains will only be to the withdrawing
member and the stocks sold will closely match the withdrawing member’s initial investment in
stock. Other members of the LLC do not have claims on the withdrawing member’s interest
because the withdrawing member only is eligible to withdraw their capital contributions- nothing
more.
Example: Member A contributes $500 in capital contributions. $250 goes into the LLC capital
bank account. $250 goes into the LLC Brokerage Account which is linked to the LLC capital
bank account. Member A has an 8% initial stake and a total of 10 stocks. After one year,
Member A withdraws their stake in membership. They receive $250 in cash and their
investments are now $400 which increased their stake to 10%. Member A receives $250 back
from the stock sale plus the investment gain in the sale of their share of stock. First the difference
in stock gain is accounted for as additional capital contributions (stock gains) made during the
year. Then, the capital equity account is deducted for those contributions and the gain in the sales
of stock is moved into the capital draw account account before paying Member A. The other
members do not receive any gain on the sale of stock in their account because the stock purchase
was originally made using the member’s capital contribution not made using the income of the
LLC.
The LLC’s capital accounts and distributions accounts are maintained using Quickbooks and are
not separate bank accounts. Although separate bank accounts may make accounting easier, a
large capital balance in the bank account allows the LLC to lower its business bank account
maintenance expenses and qualify for better business rates. The Capital contributions
account/equity has two sections. Capital contributions and capital draws. Capital draws are not
distributed to other members but only to the withdrawing member. The amount of the Capital
draw that is taxable is not the cash contributions made but the stock gains (listed as short term or
long term capital gain). The LLC does not withhold taxes on US members capital draws (stock);
the LLC is a pass through organization. The stock gains would be taxed at the rate the IRS
determines on the member’s income from the gains, but it is best for the member to pay 30%
estimated taxes on all gains and then get reimbursed when the member files their 1040 Schedule
C. Foreign members would receive all cash contributions back but for stock gains on investment
contributions, the LLC will withhold 35% of the stock gains for the member and remit the tax
withheld to the IRS, unless they filled out a valid 8804-C form.
Distributions Account (part of LLC checking account- accounted in Quickbooks)
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The LLC maintains a separate LLC Distributions account within Quickbooks to make accounting
easier. The distributions account is mostly used for purposes of the LLC including distributions
to LLC members. Payment of guaranteed payments (60% of income before distributions) to LLC
manager Chris Comish and/or other Active Members is a business expense but also comes out of
the account. All income into the LLC flows through the distributions account. All expenses of
the LLC come out of the distributions account prior to paying the LLC members distributions.
Dividends paid by the capital contribution stocks are also paid out annually through the
distributions account. Dividends are accountable for tax purposes annually; dividends are
identified by the LLC after receipt of its 1099-DIV form from the Brokerage and thus are paid
through distributions at the end of the fourth calendar year quarter (in January). Capital gains
received in the withdrawal of a member’s stake (sale of stock) are accounted in the distribution
account only after the member withdraws their stake and the gains are moved from the capital
equity/contributions account into distribution. While the member keeps their stake their stake
grows and the stocks are not sold. The same applies to interest reported on 1099-INT by the
LLC’s broker.
All members receive distributions (after expenses and guaranteed payments are paid) of the
LLC’s profit on a quarterly basis, within 30 days after the end of each quarter paid to the LLC
member via their PayPal account (or EFT if requested by US Member (Citizen or Resident)). All
distributions are subject to self-employment taxes for US members (Citizen or Resident) and are
listed on a Schedule K-1 for reporting on the member’s 1040 Schedule C form. It is
recommended each U.S. member (Citizen or Resident) pays estimated taxes via EFTPS on the
distributions when they are received. All distributions are accounted for at year end using a
schedule K-1 for the member’s 1040 tax return. Foreign/Non-Resident LLC members will have
US taxes withheld before distributions are made. 35% taxes are withheld by the LLC for any
foreign (non-US) member unless 8804-C adjusts the withholdings. Foreign/Non-Resident
Members file form 1040-NR or 1040-NR-EZ to claim refunds on tax withholdings.
LLC Members do not receive a Form 1099 or 1042-S for their distributions or guaranteed
payments. All payments are noted on the Schedule K1. 1099 and 1042-S are only for the
payment of royalties or other payments outside of LLC member status (example
publisher/customer who works with City of Shamballa to sell books through City of Shamballa
website).
Taxes
LLC receives forms W9 from US Citizen/Resident members and W8-BEN forms from
Foreign/Non-Resident Alien members. Form 8804 -C is provided by Foreign/Non-Resident
members to certify tax rate to relieve 35% tax on all distributions/payments.
Tax rates: Foreign/Non-Resident Alien members are taxed at 35% on all income if 8804-
C/W8BEN is not received. 35% ordinary income (includes guaranteed payments), 28% capital
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gains (short- for sales of stocks etc held less than one year), 25% ordinary dividends, 15%
qualified dividends/long term capital gains.
Non-Resident Aliens: City of Shamballa income is US source income because the LLC is a US
entity. Therefore US taxes apply to all earnings through this website regardless of its users'
locations. Foreign/Non-Resident Alien members will need to submit a W8BEN form to begin the
tax withholding rates adjustment process.
First, get an ITIN (see A-1) if you do not have one. If you have one already you can skip A-1.
Second, fill out the W-8BEN form (A-2) and email it to Chris Comish.
A-1. The W-8BEN form requires you to have an ITIN number even as a Non-Resident
Alien/Foreign Member (applies to all payees wishing to relieve 35% tax withholding by claiming
tax treaty status). The ITIN is a US taxpayer number for Non-US citizens. This number is
required for the tax form (for those wishing to claim tax relief). According to the end of the page
of The IRS Interim ITIN guidelines, you do not need to mail your original passport to the IRS to
get an ITIN to claim tax treaty benefits (you will still need to submit a notarized or certified copy
of your passport with the W7 form). To get an ITIN file a W7 (Request for ITIN) form with the
IRS. Follow the instructions for the W7 form. The mailing address for the W7 form is found in
the instructions. Check both boxes a and h. In the line next to box h write: "Exception 1(a)-
Partnership Income- claiming tax treaty benefits" then on the bottom write in your tax treaty
country and treaty article number. (This information is found in Publication 901, use official text
symbol TIAS# for treaty article number). You will need a supporting document from the LLC
(your withholding agent) (see exception 1(a) in the W7 instructions, and the LLC will provide
you a signed letter (withholding agent status) and a copy of the LLC agreement with your name
on it when you request it for the packet.) Carefully follow the instructions for the W7 form
writing N/A in all non-applicable boxes. The LLC can review your W-7 form before you submit
it if you email the draft copy to com5corp(at)yahoo.com. Once it is ready to go with all
supporting documents (certified/notarized passport copy with apostille (see instructions) + letter
from LLC) you mail it to the address in the instructions. Once you receive your ITIN number
from the IRS in approximately 2 months, you can email the W8-BEN form to the LLC. Your
distributions will continue to accrue and will be paid out once the W-8BEN form is received by
the LLC. Once you have an ITIN you don't need to get another one, you can use the same ITIN
to provide to other US entities, businesses or individuals.
A-2. Send a W-8BEN to com5corp(at)yahoo.com with subject line "W8BEN form LLC
member" This form will provide relief from US taxes if your country has a tax treaty with the
US. Don't worry about filling out item 9 on the W-8 form. Once you state your country on the
form, the LLC will know your tax rate by looking in the IRS publications.
B. If you decide not to submit a W-8 form then email Chris Comish at com5corp(at)yahoo.com
so you can begin receiving distributions at a rate of 35% taxation on your payments.
By March 1st you will receive a form K-1 from LLC (received via email or paper mail)
regardless of your earnings/tax withholdings. One copy of the form K-1 will be provided to the
IRS by the LLC for you. If your earnings were taxed for any reason (i.e. no tax treaty with US)
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your tax liability (under taxes paid) will be listed on the form. If there are no taxes on your
earnings, you will not have taxes withheld but you will still receive a form regardless. If taxes
were withheld, you can use this form to present to your country's tax authority as proof of US tax
paid for potential tax relief in your country. Non-Resident Aliens/Foreign Members file form
1040-NR or 1040-NR-EZ with attached Schedule K-1 form and 8805 form with the IRS before
April 15th to claim a refund on any tax witholdings. The Schedule K-1 will be provided also to
the IRS by the LLC along with the 8804/8805 forms.
LLC files an annual 1065 return. Provides Schedule K1 to all members to track monthly
guaranteed payments and quarterly distributions. Each US member (Citizen or Resident) pays
estimated taxes on all earnings and files form 1040 with attached Schedule K1 with the IRS.
Also files a 8804 form (including forms 8804-C and 8805) for foreign/Non-Resident Alien LLC
members, and provides a form 8805 with the Schedule K1 for each foreign/Non-Resident Alien
LLC member. Uses form 8813 to remit quarterly estimated tax payments to IRS for foreign
members’ withholdings for ECI income.
Other topics
The LLC does not offer healthcare benefits or retirement benefits, however each member may
wish to contribute some of the earnings to their own SEP IRA or otherwise to defer taxes. LLC
members are not employees. LLC Members are owners based on their stake and do receive
distributions of the LLC profit on a quarterly basis. LLC members who are active receive
guaranteed income which is subject to the LLC member paying their own taxes on the income
(federal, state, local). Active foreign LLC members will have tax withheld by the LLC before
they receive payments. LLC distributions fluctuate based upon profit of the business after
expenses, the payment of stock dividends during the year and if LLC members withdraw their
membership. LLC distributions also increase if new LLC members join which adds more stock
to the capital account and thus increases dividend payments.
Tax Questions
I am confused do I get a 1042-S or 1099-MISC for the LLC payments and distributions?
Foreign/Non-Resident Alien partners must provide ITIN to receive reduction in tax or tax on all
income will be withheld at foreign partner rate of 35%. Foreign/Non-Resident Alien partners do
not receive form 1042-S and partnership does not file form 1042 for partners (LLC members).
1042-S forms and 1099 forms are only provided to customers/publishers that receive income
outside of LLC membership.
What is gained in becoming an LLC member?
You have ownership stake in the Network. Personal liability is reduced. Quarterly distributions
of LLC profit give incentive to LLC members to get more City of Shamballa members and
spread the word! You basically receive income like an employee for participating in the business
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but you are not an employee and not regulated as one. Foreign members can participate in the
LLC and the US stock market via the LLC. There are lots of pluses!
Timeline
1. Chris Comish moves to a US state and files articles of LLC formation with state.
2. LLC gets EIN from the IRS. LLC Operating Agreement is established.
3. LLC (called partnership in Quickbooks) accounts for different accounts in Quickbooks...one
Capital/Equity and one Profit/Distribution using Quickbooks. One account is the capital account
(equity) and the other is the distributions account. LLC gets a Brokerage account after paying the
initial $500-$2,500 deposit of capital contributions. Brokerage account is linked to distributions
account.
4. LLC establishes a PayPal account and links distributions account to PayPal account. (If
member withdraws their capital then Capital account would send money to Distributions account
and then Distributions account to PayPal to pay withdrawing member). All Chris Comish
functions on website are transferred to appropriate LLC members. All PayPal buttons are in
LLC’s name and individual active member email addresses set up- 1 for service A, service B etc.
4. LLC solicits members and receives applications and initial capital contributions via PayPal
(capital contributions are withdrawn into distribution account and then sent from distributions
into capital account). Members wishing to contribute additional capital later: simply go to the
PayPal button on the LLC sign up page and contribute additional capital.
5. LLC members’ names, nationalities, resident status, PayPal email addresses, capital
contributions (initial) and additional contributions are all tracked by the LLC. Also each
member’s distributions and/or withdrawals are tracked by the LLC. Foreign/Non-Resident LLC
members have 35% taxes withheld from distributions. US (Citizen or Resident) LLC members
pay 30% taxes on their own through estimated taxes.
6. Trademark assignment of The City of Shamballa is transferred from Chris Comish to the LLC.
LLC files form 1099-MISC with IRS for payments to US publishers/vendors/attorneys etc and
form 1042/1042-S for payments to foreign publishers/vendors etc (in January). LLC State/Local
Sales and Use taxes are paid quarterly to LLC state on each payment received. The state taxes
are expenses on the Federal 1065 return. Federal withholding for Non-Resident members is paid
by LLC via EFTPS?: form 8813....estimated tax withholdings for customers issued 1042-S forms
are also paid via EFTPS, State withholding on income (Sales & Use) is paid by LLC via State
tax online system as quarterly estimated state tax payments (770ES or other form).
7. Feb 15 - March 1st of each year the LLC files its tax return form 1065 with the IRS. LLC
withholds state taxes from all LLC income (paid as expense) prior to all payments and files state
unified return/composite return (502/VK1 or other form) for non-resident partners with LLC.
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LLC members receive schedule K-1 (both US and state including copy of state form 502 or
otherwise) by March 1st of each year for filing with their tax return and a copy of non-resident
LLC partner state unified/composite return/K1 for all non-residents to use as a credit against
their state/country income taxes in their home state/country on the same income. LLC files
schedule K-1 with state of LLC tax withholding and files state partnership return and state
composite tax return. Files form 8804, 8804-C, and 8805 with IRS and pays estimated
withholdings (filing form 8813 each time) via checks using 8813 form. Form 1042/1042-S are
filed not for partners but for customers/publishers with royalties. Same goes with 1099-MISC for
US customers/publishers (royalties only). LLC Members (US Citizen or Resident Alien) file
form 1040 with Schedule K1 by April 15th. LLC Members (Foreign or Non-Resident Alien) file
form 1040-NR or 1040-NR-EZ with Schedule K1 and 8805/8804-C form by April 15th.
8. Operating Agreements and Articles of Formation are amended as needed via majority vote.
Amendments typically only have to do with how the capital contributions are managed. Most
amendments do not require majority vote and are managed by LLC manager Chris Comish.
9. Member Manager Chris Comish maintains current Member List and remits to the State as
required annually to keep the business license.
10. Members receive quarterly distributions 30 days after the end of each quarter. Distributions
are paid out of profit after expenses of LLC are paid (including guaranteed payments).
Distributions include dividends and interest from Brokerage account.
Business Income + Dividends + Capital Gains on sale of stock (withdrawing member) = LLC
income - guaranteed payments (60% of LLC profit adjustable based on operating agreement) to
Chris Comish and other active members = Quarterly distributions to all members of the LLC.
*The City of Shamballa is a service mark of The City of Shamballa Social Network. All
rights reserved.