Partnership Liability Allocation

[Gretel]

Another wrinkle in my LLC mess. Partnerships get complicated real fast.

LLC, 2 members, uses credit card, but only one member is personally liable for debt.

Can this debt be allocated to this partner only as far as basis goes?

Only this partner will be at-risk for the debt and therefor the only one who can use loss from K-1.

[WhiteOleander]

I think the members can allocate it in any way they want. I think that is one of the advantages over an S-Corp.

I think they can allocate income and expenses and debt different ways.

[Gretel]

I think the members can allocate it in any way they want. I think that is one of the advantages over an S-Corp.

I think they can allocate income and expenses and debt different ways.

Yes, this is true. However, if income, expenses and/or credits are allocated differently than what the owner % is, it needs to have economic effect and is not just done to avoid taxes. I am unsure if and how this applies to different liability allocation.

I think I just answered my own question. Since the different liability stems from "economic effect" there should be no problem. Still feel a little bit itchy about basis.