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Safe Harbor Rules for Special Allocations

These rules make sure that your special allocations have "substantial economic effect" for the IRS -- adopt the safe harbor language in your operating agreement Requirements: Maintenance of capital...

Special Allocations of Profits and Losses

This is when profits and losses are distributed differently from the ratio of the member's capital interest. This is subject to specific IRS tax regulations that state that special allocations are ...

Distributive Shares

This is the share of the profit and losses allocated to each member. It's sometimes called a "profits interest" in the LLC. The distributive share is usually specified in the operating agreement. U...

LLC related definitions

Membership interest: The percentage share that a member owns in the LLC. Also called ownership interest or capital interest. Tax basis: The basis that the membership interest was set when becoming...

Converting an existing business into an LLC

In most cases the assets and liabilities of the existing business/partnership are simply transferred to the LLC with the same ownership percentage as before. For example A and B convert their 50-50...

Paying with borrowed money

This avoids having to pay taxes for getting shares (interest) in exchange for services performed. A member can simply borrow money and buy interest in the LLC outright. This borrowed money can be f...

Paying with Services

When a member receives interest in the LLC in exchange for services. This is treated as income equal to the value of the interest the member receives and must pay income tax on it (even if the memb...

Paying with appreciated property

If a member transfers property to a LLC that has appreciated since the member purchased it (or inherited or received as a gift) then no taxes are due until the LLC sells it. The tax basis is set at...

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  • Updated 2 days ago by vince
Paying with property

A member can transfer title to property or give equipment, patents, trademarks etc in exchange for interest in the LLC. If the other LLC members agree on the value of the property there is no legal...

Paying with cash

This is simple. The tax basis for each member is simply the amount of cash invested by the member. This will change with ongoing allocated profits and losses paid to members and liabilities of the ...

Archery

"culmination of several years of hard work - at the grand opening of our breathtaking new 50,000 SF outdoor range" 2675 Francisco Blvd E, San Rafael, CA 94901 http://marinarcheryrange.com

  • Updated 2 days ago by vince
What Entrepreneurs Call 'Sweat Equity' the IRS Calls 'Taxable'

"Bob receives $100 dollars in sweat equity from ABC Corp. Bob is required to pay taxes on the value of sweat equity received ($100 dollars) as earned income. Bob pays taxes on the $100 dollars of i...

  • Updated 1 day ago by vince
Sweat Equity

"Sweat equity is an ownership stake that is used as compensation to those making non-monetary contributions to a business. If a new company does not have sufficient cash assets to pay partners, emp...

  • Updated 1 day ago by vince
Capital Interests

Initial members of a new LLC put in money (capital contributions) to get started and can consist of cash property services promise to contribute cash, property, or services in the future This gets ...

LLC Shares

Arrangements typically used to setup an LLC and divide assets and profits and losses among members For sole proprietorships it's straightforward. For partnerships that are converting to an LLC the...

Boomers Want to Stay Home. Senior Housing Now Faces Budding Glut

“The rise of technologies that help the elderly stay in their homes threatens to upend one of commercial real estate’s biggest bets: Aging baby boomers will leave their residences in droves for sen...

  • Updated 6 days ago by vince
The Secret Benefits of Retelling Family Stories

“kids ab­sorb more in­for­ma­tion from fam­ily sto­ries than most adults think. And that knowl­edge be­stows sur­pris­ing psy­cho­log­i­cal ben­e­fits, re­search shows. The best hol­i­day sto­ries ...

  • Updated 7 days ago by vince
Healthy at 100

Why do some people age in failing health and sadness, while others grow old with vitality and joy? Later years as a time of harvesting, growth, and maturity vs deterioration of our health swimming...

  • Updated 7 days ago by vince
Sound More Confident and Persuasive

“when we’re trying to seem persuasive, the volume of our words — when vocalized, of course — can have an outsize impact“ https://www.nytimes.com/2019/11/10/smarter-living/how-to-sound-more-confiden...

  • Updated 8 days ago by vince