Discussion:What makes a partner in LLC?

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Discussion Forum Index --> Accounting Questions --> What makes a partner in LLC?

Ddj712 (talk|edits) said:

October 15, 2007

I have a client who is setting up another LLC to purchase a building he will rent to his single-member "business-operating LLC" and some accompanying rental property. He has applied for financing from the bank, but his LLC assets are not sufficient to obtain the required funding, so his wife is required to be a guarantor on the loan also. I'm wondering if this means she needs to be a partner in the LLC also? This is occurring in Alabama (not community property state). Thanks for any help!

CrowJD (talk|edits) said:

15 October 2007

The short answer is "no" she does not. I need to state that I am not an Alabama attorney, and they might want to check with one. However, if she were a member, and took out a loan in her own name, then loaned it to the new LLC, I think it may have advantages taxwise. You may want to get opinions from the tax forum here. See if you can slow them down to think it all through... for instance, why is the business operating LLC taking out this loan, seems like the new LLC would take it out?

Ddj712 (talk|edits) said:

October 16, 2007

I'm sorry, I didn't mean to imply that the LLC is taking out the loan. The individual, who is the sole member of the operating LLC, is the one taking out the loan. I advised him to set up a new LLC to hold the property. However, since he doesn't have a steady paycheck and the business LLC is only a few years old, his wife's income and their joint assets are required to obtain funding for the individual to contribute to the new LLC.

I don't think I want them both as members due to the SE tax issue. She won't be materially participating in the rental operations, I don't believe. The property consists of a shop that the business LLC will move into, as well as a couple of adjoining and nearby properties that are currently rented out to third parties.

Thanks for your input!