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    5 Replies Latest reply on Apr 8, 2009 11:26 AM by Bridge

    LLC buying out other Member

    sandquad Newbie
      Hello, we formed a LLC 10 years ago in Oregon, we are three members, I'm buying out the other two members, and I;m the
      other member, Question.... can I still keep the LLC, and if so, what tax will I fall under?
      thanks D. Wilson
        • Re: LLC buying out other Member
          LUCKIEST Guide
          LLC buying out other Member, Welcome D

          If you have been in business 10 years, you should have both an accountant and a lawyer.
          Ask the professionals
            • Re: LLC buying out other Member
              sandquad Newbie
              Hello, Thanks, but one of the member that I'M buying out, thinks he is a Accountant, no decreed
                • Re: LLC buying out other Member
                  chapeastwood Newbie

                  You should be able to keep it the LLC. You would need to seek legal advice on How to transfer ownership of an entity to another individual (or even another entity).

                  Best Regards,
                  • Re: LLC buying out other Member
                    dublincpa Scout

                    Check with your attorney to find out if an asset purchase in a new entity would allow you to avoid successor liability. It might not.

                    Assuming you will keep the old entity and that the operating agreement allows for it, you can easily get a lawyer to do documents for the purchase. Otherwise, there might be additional documents and amendments to the operating agreement.

                    Whether the LLC is taxed as a partnership, S Corp or C Corp along with the details of the business's (sp?) tax situation will help determine whether you should buy their interests from them directly or contribute the money to the LLC and have the LLC redeem their interests.

                    If you are taxed as a partnership now, there will be two tax returns - A partnership through the buyout and a Schedule C on your 1040.

                    If a S Corp, you and the partners can agree to allocate the income/deductions as if there were two separate tax years - prebuyout at current allocation and postbuyout at 100% you, but all on one tax return. Otherwise, the default is an allocation of the full year based on the percentage of ownership multiplied by the percentage of the year that they owned shares. A 1/3 partner owning for 3 months (1/4yr) would be allocated 1/12 of the full year. => If the buyout was 3/31, they would each get 1/12 of the P&L and you would get 10/12's on the K-1s.

                    If a C Corp there is one tax return for the year, no matter what.
                • Re: LLC buying out other Member
                  Bridge Navigator
                  Yes, you can keep the LLC. How were you taxed pervioulsy? The IRS does not recognize LLC as a taxable structure. You either had to "elect" how to be taxed or the IRS automatically classifies you - probably as a partnership in your case.

                  If you have been taxed as a parrtnership, you may be able to reclassify with teh acquisition of the partners interest.

                  Will there be a non-compete agreement with the buy-outs?

                  You may want to consider your purchase price allocations and there effect on your future taxes.