No, you need to report the taxable income allocated to you based on the distribution provisions contained in your operating agreement. Based upon your question, I strongly consider that you seek the guidance of an accountant rather than doing your company's taxes on your own.
This advice is for INFORMATIONAL PURPOSES only and should not be relied upon as legal advice. No attorney-client relationship shall be formed as a result of the answer above.
Whether you were active or not may affect the character of your share of the income, passive or ordinary, but not whether you need to report your share of the income or not. The amount of income you need to report on your tax return depends on the profit sharing agreement you have with your partner - assuming you are equal partners, you would report 1/2 or 50% of the income of the business entity.
This information is provided for educational purposes only, and is not to be relied upon as legal advice. You should consult with an attorney with full disclosure of all facts and opportunity to consider all or alternative options.
The Company Agreement and Internal Revenue Code would control allocations of profits and losses. In a 50/50 deal, that's usually going to be about half/half. There are a few things that may alter it, but not much. It's quite possible that you may have more write-downs than you realize. You really should be speaking with a CPA.
If you do not have a Company Agreement, then I would encourage you to hire an attorney to draft one. It could be well worth it.
The above statements are provided as general information and not intended as legal advice. Each matter has its own set of unique circumstances that cannot be adequately addressed without consultation. You are strongly advised to hire an attorney licensed to practice law in your state to represent you.
My colleagues all make good points. I have just a couple of brief comments:
A Texas LLC does allow for a "special allocation" of profits. This special allocation allows for a disproportionate split of profits and loss between the members that does not necessarily reflect their percentages of ownership. Again, the Operating Agreement is key.
In addition, a Managing Members' share of net profit can be considered earned income. A Managing Member is considered to be an active owner. The active status qualifies the Managing Member for special "fringe benefit" treatment. However, a Members' share of the bottom-line or Net profit of an LLC is not considered earned income. Therefore, a mere Member's income is not subject to self-employment tax.
Compensation can also take one of two forms: (1) distributions of profit; or (ii) guaranteed payments. A distribution of profit allows each member to pay themselves by merely writing checks whenever they need the money. On the other hand, a guaranteed payment represents earned income to the members, thereby qualifying them to enjoy the benefits of tax-favored “fringe benefits.”
I strongly suggest you follow the advice of the others who have answered and visit with a good CPA and a local attorney that understands the ins and outs of working with LLCs.
The other answers are 100% correct. Your question reveals that you need an accountant and a lawyer to help you with these kind of issues. All businesses do.
Routine questions like this are not complex and are answered without too much expense. Doing things incorrectly, can get quite expensive.