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Law Educator, Esq.
Law Educator, Esq., Attorney
Category: Business Law
Satisfied Customers: 118184
Experience:  All corporate law, including non-profits and charitable fraternal organizations.
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Can I invent a product, file for a patent and sell/licence

Resolved Question:

Can I invent a product, file for a patent and sell/licence the patent pending to an LLC I set up and as the LLC sell fruits of the invention and passes royalties to me the inventor I take advantage of sect 1235 as an individual inventor?
Submitted: 8 years ago.
Category: Business Law
Expert:  Law Educator, Esq. replied 8 years ago.
You can do exactly what you are proposing to do and receive long term capital gain treatment on your sale and you would only have to claim the royalties paid on the patent. I am assuming you have read the IRS Code 1235, this allows an inventor to sell their patent rights and treat the sale not as a sale of inventory but as a long term capital gain. Since the LLC is a separate person for purposes of owning property, suing and being sued, your sale or transfer of the rights to the LLC is a transfer. See:

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Customer: replied 8 years ago.
The royalties will be taxed at 15% correct?
Expert:  Law Educator, Esq. replied 8 years ago.
Correct and they are claimed on your Schedule E forms.
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