Guaranteed payments to partners are payments meant to compensate a partner for services or use of capital. In effect, they are the equivalent of a salary for partners or limited liability company (LLC) members. Such payments eliminate the risk of a partner making personal contributions of time or property for which they are never compensated if the partnership is not successful. "Guaranteed" refers to the fact that such payments — known as first-priority distributions — are made without regard to the partnership's profitability. In fact, such payments constitute a net loss for the partnership. In addition, they can create special and unexpected tax implications if they are not handled properly. Income from a guaranteed payment to a partner may be subject to self-employment tax, though that depends on the terms of payment.  

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