I received a K1 for our new LLC. It showed a loss of $1000, but when I entered the information into TurboTax, it didn’t make a difference on my overall tax liability. I thought that I would pay taxes on a profit from the LLC but also have lower taxes if the LLC came out with a loss.
Well, it should have, unless your total tax liability was already 0.
Your thoughts are correct–profits from the LLC will increase your taxable income, while losses will reduce it.
Depending on your tax bracket, the difference in taxes will be some percentage of the change in taxable income.