LLC owned by Dad, Son, and Trust. They would like to change the ownership %. without exchanging a lot of money basically between the family. Any suggestions other than gifting?
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Is this LLC for business, rental, or investment? It might help to know whether their goal is to change the income distribution percentages, the capital percentages, or the degree of management control percentages.
If it's business, and the goal is to change the income distribution, and they can relate the distribution to the labor, then couldn't they just change the operating agreement with regard to guaranteed payments without changing the capital accounts or other tax questions? Or does state law limit LLC distribution flexibility more than vanilla partnerships? (Caution: I'm not particularly experienced with LLCs or partnerships; I know enough about these to use the buzzwords in ways that let me play an expert on the internet.) -
farming business
Dad ready to slow down and basically let go of most of his ownership. Would like to pass it to the Trust.
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That doesn't really address the question. Ownership and labor are distinct; it's not unheard of for a parent to turn over operations to a child without giving up any ownership. Unless the operating agreement specifies specific tasks or amount of work, he can just do less. If he's working on the idea that his share of ownership has to match up with his share of effort, then perhaps you should discuss that issue with him. I hesitate to draw specific legal conclusions about what he can or cannot do, but he certainly shouldn't assume that he has to give up ownership when he cuts back on his work load.Originally posted by gman View Post
So it gets down to: What is the role of the trust, and what is he trying to accomplish, monetarily?
Also, are there estate or state inheritance tax issues? One would hope that these were largely addressed when the trust was established, assuming it was set up for that purpose.Last edited by Gary2; 10-15-2011, 09:39 PM.Comment
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