Discussion:LLC-disproportionate capital conributions
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Discussion Forum Index --> Advanced Tax Questions --> LLC-disproportionate capital conributions
Discussion Forum Index --> Tax Questions --> LLC-disproportionate capital conributions
ReadMyLips (talk|edits) said: | 5 September 2008 |
| I have an LLC with two members, one is allocated all of the profits and losses and the other has a 60% capital interest and is not active in the business. The active member has contributed lots of capital for expansion of the business while the inactive me has not made any capital contributions. The active member wants to buy out the 60% member, but she refuses to respond to the request. My dilemina is in that showing the large capital account for the active member, the other member might somehow have a stake in that capital. I considered showing the active member's contributions as a loan to the LLC but then she won't have a large enough capital account to take the losses. Or I could show an equivalent contribution amount due from the inactive member.
Their capital accounts will never be in proportion with their capital ownership % since the losses are allocated to the active member. But I've always thought that contributions and distributions should be in proportion with ownership %. Any thoughts or advice is appreciated. | |
| 8 September 2008 | |
| Need to review the partnership agreement, see what it says about withdrawal rights. It may say B has a 60% capital interest initially, but it should say something about additional owner contributions impacting capital accounts (as well as P&L allocations), which in turn would affect withdrawal rights. Ownership of capital reflects the respective withdrawal rights of each partner, which won't be 60/40. | |
ReadMyLips (talk|edits) said: | 8 September 2008 |
| I did look at the agreement and found that the withdrawals were limited to the capital account, so I don't think it will be a problem.
Thanks for the input. | |
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