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BizIPEsq.
BizIPEsq., Attorney
Category: Business Law
Satisfied Customers: 996
Experience:  I am a business attorney. I represent individuals and companies with all business related matters.
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My family has created a new business. I want the children to

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My family has created a new business. I want the children to be the financial beneficiaries if it works out well. I want the control the business, but not benefit in any major financial way if it becomes worth a lot of money. If we use an LLC do I simply make myself a small percentage owner and also the member manager, whilst giving the children the vast majority of the interest in the LLC?
Submitted: 1 year ago.
Category: Business Law
Expert:  BizIPEsq. replied 1 year ago.

BizIPEsq. :

Hello, I will be assisting you

BizIPEsq. :

As you correctly noted an LLC is a very flexible structure and it allows you to assign various degrees of ownership and profit sharing.

BizIPEsq. :

when starting a new business it is the perfect opportunity to grant your children equity in the company. You can do it as following:

BizIPEsq. :

either assign yourself a small equity portion and a large profit share and assign them a larger equity portion and a small profit share. If you do that you would need to make sure that you retain management rights in the company so retain at least 51%

BizIPEsq. :

or you can do the above and designate yourself as a managing member and them as 'regular' members. You would also need to assign the managing member the necessary management rights to make sure that you retain control of the company until the time that you are ready to pass it on to them

BizIPEsq. :

this is done through careful drafting of the operating agreement of the LLC

Customer:

If I control the LLC from a management standpoint as a managing member could I designate salary to myself along the way unless I don't want to receive anything?

Customer:

I would really rather own about 1% but have control until I give it up. How do I keep control as the manager but not have the percentage control in the equity?

Customer:

I presume it's a matter of drafting my powers as the managing member in such a way that it accomplishes what I'm after.

BizIPEsq. :

The issue of payments to the members of an LLC is fairly complex. The decision of whether to issue a guaranteed payment (it's an IRS) which is defined as payments to a partner in his or her partner capacity for services or the use of capital if determined without regard to the income of the partnership or whether to classify them as distribution depends on the positions of the members, the revenue of the LLC and amount that is being distributed etc.

BizIPEsq. :

as far as control, you would designate yourself as the managing member and give the managing member all management decisions

BizIPEsq. :

those duties are defined in the operating agreement

BizIPEsq. :

because this is not the ordinary LLC multi partner situation this would require the involvement of an accountant and an attorney to structure the payments properly and to draft the operating agreement in a way that would give you operational freedom

Customer:

OK. Thanks.

BizIPEsq. :

you are welcome

BizIPEsq. :

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BizIPEsq., Attorney
Category: Business Law
Satisfied Customers: 996
Experience: I am a business attorney. I represent individuals and companies with all business related matters.
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