LLC Answers

Generally, when this question is asked it is two fold.  One, how are previously purchased equipment or previously incurred debt transferred to a limited liability company when an LLC is created later for a business.

Second, is it possible to not be personally liable for that debt after the transfer?

Question #1:  Yes, you can transfer any assets or debt to your LLC. You transfer assets with a document called a Bill of Sale and you assign debt with an assignment of the debt contract and obligation.  The LLC needs to agree to undertake the debt obligation by having its members formally … Continue Reading

The answer to this depends on how the limited liability company is taxed. If taxed as a partnership/pass through (which is the default taxation for an LLC), owners of an LLC that also work for that limited liability company are generally not seen by the Internal Revenue Services as employees.

Rather, owners are categorized as self employed.  All income earned by the LLC business is seen as self employment income and each member is required to pay and withhold self employment taxes related to that income with the IRS. There is a maximum amount subject to some of the tax.  Now … Continue Reading

When a person puts capital into a limited liability company in exchange for a membership interest, he or she has no legal right to get that capital back unless the LLC and the person otherwise agree to a guaranteed return in a written agreement.  If, on the other hand, a person loans money to an LLC, then the LLC (not the other members) has an obligation to pay back the loan per the loan agreement terms.

In either case, other members of the company are never obligated to personally pay back any capital or loans of another member unless there is … Continue Reading

If you have an existing limited liability company and now want to admit a new Member, you need to consult with the provisions in your LLC Operating Agreement to determine how to admit a new Member.  This Agreement governs the requirements and processes for your particular LLC when it comes to admitting a new Member to your limited liability company.

Generally (although this can vary based on the specific LLC’s rules), a vote of the Members will be required to admit a new Member and so a certain percentage of the current LLC members must approve.  Make sure all pre-admission requirements … Continue Reading

I get so many questions from members of an existing LLC about the ability to “get rid of” or remove another member from the LLC.

The ability of an LLC or another member to unilaterally remove another member is only possible if there is a right to do so in the LLC Operating Agreement of the LLC and the member to be removed has agreed to be bound by the LLC Operating Agreement.  This right can also be in another separate document as long as the agreement is in writing and the member to be … Continue Reading

The word "Member" is used to describe a person or entity that has an ownership interest in a limited liability company.  Generally, a Member will own a certain number of Membership Units (similar to shares in a corporation) but an LLC can be set up where a Member owns a Membership Interest which is expressed as a percentage (e.g., 75%) of the limited liability company.

This question about rights and obligations of an LLC Member is a difficult one to answer because the LLC laws actually allow an LLC to define for that particular LLC what rights and obligations a Member … Continue Reading