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Law Educator, Esq.
Law Educator, Esq., Attorney
Category: Business Law
Satisfied Customers: 111546
Experience:  All corporate law, including non-profits and charitable fraternal organizations.
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I'm located in Utah and have an LLC that holds a franchise I

Customer Question

I'm located in Utah and have an LLC that holds a franchise I own with a partner 50/50. I need to transfer my interest into another LLC, which will be a holding company for that interest and some other businesses. I understand I should use a transfer of interest document to do this transfer, but are there tax issues I need to be concerned with for this transfer, either Utah tax issues or Texas tax issues (where my holding LLC is formed). Thank you.
Submitted: 6 months ago.
Category: Business Law
Expert:  Law Educator, Esq. replied 6 months ago.

Thank you for your question. I look forward to working with you to provide you the information you are seeking for educational purposes only.

Actually, you transferring interest to a holding company would not cause a taxable event to you or the LLC. You are moving your interest to an LLC that you own and you can do the transfer as a donation from the current LLC to the new LLC for no monetary exchange. There would be no tax event in UT nor in Texas nor any federal tax issue.

Customer: replied 6 months ago.
Thank u. So the Texas LLC can take my 50% UTAH LLC interest in the franchise (which is a going concern and profitable), without paying any consideration and without tax consequences?
Expert:  Law Educator, Esq. replied 6 months ago.
Thank you for your reply.
That is correct, same owner in both LLC, so the transfer can be without consideration and there are no tax consequences on the transfer. Of course, when the LLC begins making money and it begins flowing to the new LLC, then taxes are paid on that income.