Announcement

Collapse
No announcement yet.

LLC Equity Investor

Collapse
X
 
  • Filter
  • Time
  • Show
Clear All
new posts

    LLC Equity Investor

    I have a partnership where one of the parties is an equity investor. He invested $160k in consideration for a 25% equity interest in the partnership. The agreement says that the investor "shall be paid twenty-five percent of the monthly net profits on a quarterly basis." The agreement also says that "Investor shall receive no security for his investment other than the equity participation..." He is listed as a member on the LLC agreement filed with the Secretary of State.

    Both the manager of the partnership and the attorney's who drafted the operating agreement say that the investor paid $160k for the right to 25% of the profits for ten years and that the $160k does not need to be paid back.

    My question, what do I do with the $160k as far as the capital account on the 1065? The attorney is adamant that the investment was not a capital contribution that should be included in the investors capital account.

    I have never dealt with this before and would love any input.

    Thanks,
    Carol

    #2
    Right or wrong

    Here is what I would do........... I would book the contribution as capital investment as it is the only way to buy into the profit sharing %. What happens down the road will be a tax loss, intentional or not.................
    This post is for discussion purposes only and should be verified with other sources before actual use.

    Many times I post additional info on the post, Click on "message board" for updated content.

    Comment

    Working...
    X