How JustAnswer Works:

  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site.
    Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.

Ask Barrister Your Own Question

Barrister
Barrister, Attorney
Category: Business Law
Satisfied Customers: 22964
Experience:  14 years practicing attorney, MBA
19958803
Type Your Business Law Question Here...
Barrister is online now
A new question is answered every 9 seconds

should a promissory note to pay for a 20% ownership interest

Resolved Question:

should a promissory note to pay for a 20% ownership interest in an LLC be designated as an asset on the books of the LLC? (question for purposes of a divorce business valuation)
Submitted: 2 years ago.
Category: Business Law
Expert:  Barrister replied 2 years ago.
Hello,

Thank you for using JA. If the promissory note is owed to the owner/member personally of the LLC, then it is a personal asset of the individual. If it is actually owed to the LLC as some type of contribution to the assets of the LLC, then it should be listed as an asset of the LLC. A promissory note is a “note payable“ from the standpoint of the maker and it is a “note receivable“ from the standpoint of the payee.
A note received is an asset because it becomes a claim against the debtor for the amount due.
.
For example, owner sells some percentage of the LLC for $50K with the note being made out to him personally. Then it is his personal asset and would not contribute to the value of any assets in the LLC. But if the owner has the new buyer issue a note to the LLC for $50K, that is an asset of the LLC and increases the value of the LLC assets.
.
It boils down to who is the payee of the note.
.

.

.

Thanks.

Barrister

.

If you need further help please do not rate 2 stars/faces "Helped a little" or 1 star/face "I expected more". This is considered a negative rating against me.

.

Just reply to me via the “CONTINUE CONVERSATION” or “REPLY” button with the questions you have as I receive no compensation for my efforts for the lowest two ratings.

.

Please keep in mind that I am trying to help you understand and resolve your situation. I don't make the laws, I am just reporting or interpreting them, so the outcome may not be what you had hoped for.

.
Please be patient as I am typically working with several customers at any given time. Some answers take 5 minutes, some 35 minutes. But rest assured, I will get back to you.

.

Please be aware that I am not entering into an attorney client relationship, this is a public forum, and all posts are available for public viewing. There is no duty of confidentiality that attaches to any posts. With that in mind, please do not post any specific information you do not want available for public viewing. The information provided is not a substitute for a local attorney’s legal advice.

Customer: replied 2 years ago.
more info: Mr. X was offered and accepted the right to purchase a 20% interest in LLC by signing a prom note. he pays on the prom note through guaranteed distributions from LLC. he pays income taxes from these distributions and then gives the rest back to LLC and this is applied to the balance due on the prom note. 3 other partners pay on their prom notes in the same manner. I'm trying to argue that the value of Mr. X's interest in LLC should NOT be reduced by the amount due on the prom note. for purposes of divorce settlement.
Expert:  Barrister replied 2 years ago.
I understand your goal, but I can't agree with you. For example, if someone owns a house worth $1MM and owes $1MM, there is no equty and essentially zero value since the debt and equity cancel each other out.
.
If X owns 20% of the LLC, but his note is equal to 20% of the market value of the LLC, the same outcome occurs. In a property settlement, you would have to come up with the net value of the LLC interest (i.e. value - debt). Presumably his equity would be increasing every year as long as the distributions were larger than the payment and interest on the note. So every year, the net value of the LLC interest would increase, but if it is early on in the purchase agreement, there may be little value now.
.

.

.

Thanks.

Barrister

.

If you need further help please do not rate 2 stars/faces "Helped a little" or 1 star/face "I expected more". This is considered a negative rating against me.

.

Just reply to me via the “CONTINUE CONVERSATION” or “REPLY” button with the questions you have as I receive no compensation for my efforts for the lowest two ratings.

.

Please keep in mind that I am trying to help you understand and resolve your situation. I don't make the laws, I am just reporting or interpreting them, so the outcome may not be what you had hoped for.

.
Please be patient as I am typically working with several customers at any given time. Some answers take 5 minutes, some 35 minutes. But rest assured, I will get back to you.

.

Please be aware that I am not entering into an attorney client relationship, this is a public forum, and all posts are available for public viewing. There is no duty of confidentiality that attaches to any posts. With that in mind, please do not post any specific information you do not want available for public viewing. The information provided is not a substitute for a local attorney’s legal advice.

Barrister, Attorney
Category: Business Law
Satisfied Customers: 22964
Experience: 14 years practicing attorney, MBA
Barrister and 4 other Business Law Specialists are ready to help you

JustAnswer in the News:

 
 
 
Ask-a-doc Web sites: If you've got a quick question, you can try to get an answer from sites that say they have various specialists on hand to give quick answers... Justanswer.com.
JustAnswer.com...has seen a spike since October in legal questions from readers about layoffs, unemployment and severance.
Web sites like justanswer.com/legal
...leave nothing to chance.
Traffic on JustAnswer rose 14 percent...and had nearly 400,000 page views in 30 days...inquiries related to stress, high blood pressure, drinking and heart pain jumped 33 percent.
Tory Johnson, GMA Workplace Contributor, discusses work-from-home jobs, such as JustAnswer in which verified Experts answer people’s questions.
I will tell you that...the things you have to go through to be an Expert are quite rigorous.
 
 
 

What Customers are Saying:

 
 
 
  • Mr. Kaplun clearly had an exceptional understanding of the issue and was able to explain it concisely. I would recommend JustAnswer to anyone. Great service that lives up to its promises! Gary B. Edmond, OK
< Last | Next >
  • Mr. Kaplun clearly had an exceptional understanding of the issue and was able to explain it concisely. I would recommend JustAnswer to anyone. Great service that lives up to its promises! Gary B. Edmond, OK
  • My Expert was fast and seemed to have the answer to my taser question at the tips of her fingers. Communication was excellent. I left feeling confident in her answer. Eric Redwood City, CA
  • I am very pleased with JustAnswer as a place to go for divorce or criminal law knowledge and insight. Michael Wichita, KS
  • PaulMJD helped me with questions I had regarding an urgent legal matter. His answers were excellent. Three H. Houston, TX
  • Anne was extremely helpful. Her information put me in the right direction for action that kept me legal, possible saving me a ton of money in the future. Thank you again, Anne!! Elaine Atlanta, GA
  • It worked great. I had the facts and I presented them to my ex-landlord and she folded and returned my deposit. The 50 bucks I spent with you solved my problem. Tony Apopka, FL
  • Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help. Mary C. Freshfield, Liverpool, UK
 
 
 

Meet The Experts:

 
 
 
  • Law Pro

    Attorney

    Satisfied Customers:

    1426
    20 years experience in business law - sole proprietor, partnership, and corporations
< Last | Next >
  • http://ww2.justanswer.com/uploads/LA/lawpro/2012-6-25_171315_PT206740s.64x64.jpg Law Pro's Avatar

    Law Pro

    Attorney

    Satisfied Customers:

    1426
    20 years experience in business law - sole proprietor, partnership, and corporations
  • http://ww2.justanswer.com/uploads/DC/DCraneEsq/2012-8-14_14436_DCrane.64x64.jpg MShore Law's Avatar

    MShore Law

    Attorney

    Satisfied Customers:

    1233
    Drafted Negotiated and/or Reviewed Thousands of Commercial Agreements
  • http://ww2.justanswer.com/uploads/FL/FLAandNYLawyer/2012-1-27_14349_3Fotolia25855429M.64x64.jpg FiveStarLaw's Avatar

    FiveStarLaw

    Attorney

    Satisfied Customers:

    1162
    25 years of experience helping people like you.
  • http://ww2.justanswer.com/uploads/dkaplun/2009-05-17_173121_headshot_1_2.jpg Dimitry K., Esq.'s Avatar

    Dimitry K., Esq.

    Attorney

    Satisfied Customers:

    1142
    Run my own successful business/contract law practice.
  • http://ww2.justanswer.com/uploads/ohioatty/2009-1-22_185545_me.jpg J.Hazelbaker's Avatar

    J.Hazelbaker

    Attorney

    Satisfied Customers:

    393
    Experienced and trained in the area of business law.
  • http://ww2.justanswer.com/uploads/scottymacesq/2009-6-10_221523_small.jpg RGMacEsq's Avatar

    RGMacEsq

    Attorney

    Satisfied Customers:

    393
    Licensed Texas General Practice Attorney
  • http://ww2.justanswer.com/uploads/BA/barristerinky/2012-6-10_22423_office.64x64.jpg Barrister's Avatar

    Barrister

    Attorney

    Satisfied Customers:

    301
    13 years practicing attorney, MBA
 
 
 

Related Business Law Questions