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    #1

    Off-topic, kinda

    I am so very irritated with a client of mine. Maybe, it's me, but I don't think so. Hang in while I try and make some sense of this mess, if possible.

    LLC filing as a partnership has 8 general partners and 7 limited partners. I've had emails and calls out all week about getting me the correct figures for the capital accts. No calls back, no emails answered, etc. Getting a very weird vibe.

    Tonight I get a call telling me that they have some new "shareholders" and the capital accts that they have been actively "marketing for to build up capital" are now totaling close to $12M. At the end of last year, they were $250K. Obviously, the partner allocations that totalled 100%, now they total about 50 times that.

    It appears they've treated this LLC like a corp when they aren't one. I think they are selling shares or equity stakes, if that is the right terminology? Can they do this.

    I guess my question is can this company bring in add'l "people" without other members giving up something, which they have not?

    I'm sure this post is not making too much sense, as my thoughts are all over the place, but if someone can make read throught this and has heard of this before, please tell me. My gut is telling me no way.

    Very sorry for the long post.

    D
    Last edited by DTS; 03-31-2009, 03:48 AM.
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    #2
    I feel for you

    For information about what a California LLC can and cannot do and how it can clean up any mess it may have made, you want advice from California folks. I know that would include ST and Joannmcq. I would suggest that you PM them if they do not chime in by the time you read this post.

    I will only venture to suggest that while they FILE TAXES as a Partnership, at least in NC an LLC FUNCTIONS IN EVERY OTHER WAY as a Corp and "shareholders" rather than "partners" is the correct term for the people who own the business. In any event there is always a manner in which owners may be added to a business and I am sure that you the legal adviser and the owners will get the paperwork straightened out and make everyone happy with their contributions and resulting shares of profit and loss.

    One thing that shines through here is that these owners do not consult you regularly through the year. If you have misunderstood their situation and therefore the amount of time you need to correctly do their return, you should make them get an extension or take their business elsewhere before you let them interfere with work for more cooperative clients.
    Last edited by erchess; 03-31-2009, 03:52 AM.

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      #3
      Erchess

      Thanks for the suggestions. I will speak with Sandy tomorrow, if for nothing more than to vent some. Joanmcq is not around much anymore.

      I could be so wrong, but I don't believe CA will allow such a thing. Could be wrong. Part of what has me so p/o is this "11th-hour" crap. Like everyone else, I've got 60+ returns sitting in front of me and many more to come in and now have to deal with this.

      Oh well. It's late and I am off to bed. Probably, will see this in a different light in the morning, but I'm not betting on it.

      Thanks again,

      D

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        #4
        Dennis, I hope you got a good retainer for this mess. Otherwise, hang in there. I don't have any advise for you on this one but that, maybe, they can be treated as silent investors and have no ownership rights but get a fixed interest rate before profits are allocated to the "normal" members?

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          #5
          (Moved this comment in edited form to the other thread concerning the same matter)
          Last edited by JohnH; 03-31-2009, 10:47 AM.
          "The only function of economic forecasting is to make astrology look respectful" - John Kenneth Galbraith

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            #6
            Dennis, I hope you got a good retainer for this mess. Otherwise, hang in there. I don't have any advise for you on this one but that, maybe, they can be treated as silent investors and have no ownership rights but get a fixed interest rate before profits are allocated to the "normal" members?
            Gretel,
            I did ask him this, as I was trying to wade through this. I was not given a straight answer. I will ask again.
            Is it possible that they are bringing in so many investors that they may be running afoul of any securities regulation/registration issues? Not trying to complicate things, but that thought crossed my mind when you mentioned the dollar amounts involved and the "selling of shares or equity stakes".
            John,
            I don't know. What I can tell you is that one of the investor's was asking the managing member about making an 83(b) election for the cap gain treatment on his '08 return and I went off the deep end. Maybe, Gretel is on the right track w/the silent investor idea. Can this be done in an LLC filing as a partnership?

            D

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