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Richard, Attorney
Category: Business Law
Satisfied Customers: 55278
Experience:  32 years of experience practicing law and a businessman.
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We have a 2-person AZ LLC for a business we started 2 years

Customer Question

We have a 2-person AZ LLC for a business we started 2 years ago and were running together. However, last year my business partner went back to a full time job, so I am running the entire business and she comes in a few hours one day a week. Can I deduct money paid to an accountant for work that was originally part of her job against her equity? In addition, can I deduct the money I'm paying the people I have to bring in to cover her shifts against her equity? How do I change her member status when she's not doing anything to contribute to the company?
Submitted: 7 years ago.
Category: Business Law
Expert:  Richard replied 7 years ago.

Good evening. Let me see if I can help you. First, there are two roles you were originally filling. You were both members and employees of the LLC. When you were both working full time, it didn't make much difference that you weren't paid compensation as long as you were contributing equally. Now that you are not, you are entitled to compensation for working. This is an expense of the LLC and this money would be paid to you before any distributions to the two of you as owners. Second, yes the money you have to pay others to do the work of the now non-working member would also be an expense of the LLC and would be paid to them before any distributions to the members. Then, any money left would be available to be distriubted to you two as the members. Third, if you are no longer happy with the ownership sharing arrangement due to this change, and your operating agreement does not address this possibility, then you need to sit down with her and either discuss a change in the ownership interest or figure out how to buy her interest from her...perhaps over time if you cannot afford to pay a lump sum.



I hope this has given you the guidance you were seeking. I wish you the best of luck!


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The information given here is not legal advice. As all states have different intricacies in their laws, the information given is general only. This communication does not establish an attorney-client relationship with you. I hope this answer has been helpful to you.

Richard and 2 other Business Law Specialists are ready to help you
Customer: replied 7 years ago.
Thanks very much -- you mention "change in the ownership interest" -- do you mean percentages, which in our case is currently 50-50%? So we could agree to change it to 90-10 or something more equitable given the current circumstances? thanks again!
Expert:  Richard replied 7 years ago.
My pleasure! Yes, you could agree to adjust the ownership interests to reflect the changed circumstances.
Customer: replied 7 years ago.
great, thanks again!
Expert:  Richard replied 7 years ago.
No problem! You have a great night and good luck with your business!