Arrangements typically used to setup an LLC and divide assets and profits and losses among members
Initial members of a new LLC put in money (capital contributions) to get started and can consist of cash property services promise to contribute cash, property, or services in the future This gets ...
This is simple. The tax basis for each member is simply the amount of cash invested by the member. This will change with ongoing allocated profits and losses paid to members and liabilities of the ...
A member can transfer title to property or give equipment, patents, trademarks etc in exchange for interest in the LLC. If the other LLC members agree on the value of the property there is no legal...
When a member receives interest in the LLC in exchange for services. This is treated as income equal to the value of the interest the member receives and must pay income tax on it (even if the memb...
This avoids having to pay taxes for getting shares (interest) in exchange for services performed. A member can simply borrow money and buy interest in the LLC outright. This borrowed money can be f...
In most cases the assets and liabilities of the existing business/partnership are simply transferred to the LLC with the same ownership percentage as before. For example A and B convert their 50-50...
This is the share of the profit and losses allocated to each member. It's sometimes called a "profits interest" in the LLC. The distributive share is usually specified in the operating agreement. U...
This is when profits and losses are distributed differently from the ratio of the member's capital interest. This is subject to specific IRS tax regulations that state that special allocations are ...