If the business income is positive each year and you’re receiving a portion of that (30-40%?) as a distribution, then your basis should be increasing each year. That’s something you should know because you report it to the IRS on form 7203.
You could discuss with the shareholders or CFO the idea of increasing distributions because you feel investing in the business isn’t a benefit to you, and you’d prefer the liquidity provided by the distributions.
If the business is of no value to you, maybe giving up your ownership is the way to go.
But before you do that, figure out how much the FAFSA calculations would change, or if the K1 income is even making you ineligible for need based financial aid. Many people go through a lot of financial gymnastics and then find out they wouldn’t have qualified for need based FA based on the FAFSA anyway.
I thought I had heard of every form. What is this?
Sorry, should have typed supplement not profile. The CSS business supplement is submitted along with the CSS profile for those with businesses. Haven’t filled one out in a long time but remember a lot of frustration.
Regarding this…just about all colleges that use JUST the FAFSA do not guarantee to meet full financial need anyway. So whatever the SAI (formerly the EFC) is per FAFSA should be viewed as the minimum you will pay each year for college.
The more generous colleges use the CSS Profile or their own form which delves quite a bit deeper into your finances.
In your situation, it might be better to have your student look for merit aid potential which has nothing to do with income or assets. IOW, your business structure and income won’t matter.
K1 income is included in AGI for all financial purposes. If you are leaving it in the LLCs bank account, it will increase your asset value and thereby your equity in the company . It can be used to buy machinery , building or other raw materials which all increase the assets allocated to your share. When you sell the company or use the assets to generate revenues it will get converted to cash.