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Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 10105
Experience:  Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
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What is the difference between Return of Capital Contribution

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What is the difference between Return of Capital Contribution and Preferred Return?

NPVAdvisor :

Hi,

NPVAdvisor :

Return of capital contribution is simply a statement that the amount of money or capital contributed by the member to the LLC, will be returned (in SOME fashion) ..... Preferred return is the WAY in which that capital is returned

NPVAdvisor :

Most of the time there will be in an operating agreement the terminology, PREFERRED RETURN PERCENTAGE

NPVAdvisor :

and the preferred return percentage determines the percentage of a member’s un-returned capital contribution such member will receive as a preferred return. The preferred return percentage is similar to an interest rate paid on a loan. The preferred return percentage typically ranges between 5-15%, but members are free to select any percentage they wish. For example, if Steve contributes $10 to the LLC and is provided an 8% preferred return on the $10 contributed, the preferred return percentage would be 8%.

NPVAdvisor :

Hope this helps

NPVAdvisor :

Lane

NPVAdvisor :

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