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Law Educator, Esq.
Law Educator, Esq., Attorney
Category: Business Law
Satisfied Customers: 89584
Experience:  All corporate law, including non-profits and charitable fraternal organizations.
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My wife, I, and a few our friends would like to pull our money

Resolved Question:

My wife, I, and a few our friends would like to pull our money together and start investing. How should we register our venture (i.e. LP, LLC, or anything else)? What would be better from legal and tax standpoint?
Submitted: 4 years ago.
Category: Business Law
Expert:  Law Educator, Esq. replied 4 years ago.
The best vehicle for this would be the LLC which would limite the liablity of the members and allow all of the taxation to flow to the memebrs based upon their percentage of ownership in the LLC. From a tax perspective this allows each member to be responsible for their own share of the taxes instead of the company paying tax on the profits and then the members paying again when they take their shares.


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Customer: replied 4 years ago.
Thank you for the quick response. What is the process of registering this kind of LLC, basically what do we have to do? What would it be considered, an investment company? If one of us will be managing the money, how could that person officially get paid, would that person be on a payroll from LLC? Also,Is there any special requirements to register this type of LLC?
Expert:  Law Educator, Esq. replied 4 years ago.
LLC's are pretty simple. Just about all of the forms you need for registration you can get through the Secretary of State's website.

You also need to draft a set of bylaws/membership agreement. The bylaws/membership agreement would detail the percentage of ownership of each member, how the managing member would be compensated for work, how each member would be bought out in the event they wanted out or the other members wanted them out, how voting would work, and anything else you want in there about how you will operate and be controlled.

You also go to the IRS website, http://www.irs.gov and register for a Tax ID number in the name of the LLC. You can do this at the same time that you are completing the LLC paperwork with the secretary of state's office. This is because everything you will be doing will be in the name of the LLC and you will give that tax id to anyone you are investing with. At the end of each year, the LLC prepares a tax form and issues K-1 forms to each member for their share of the profits and the managing member would get either a w-2 as an employee to reflect his/her pay for managing in addition to the K-1. The LLC submits the tax form, but pays no taxes, the members pay the taxes.
Law Educator, Esq., Attorney
Category: Business Law
Satisfied Customers: 89584
Experience: All corporate law, including non-profits and charitable fraternal organizations.
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