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Loren, Attorney
Category: Business Law
Satisfied Customers: 34398
Experience:  30 years experience representing clients .
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I have two Farm C corporations that need new barns, equipment,

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I have two Farm C corporations that need new barns, equipment, cattle, etc, and want to form a LLC with each Corporation being a member. They want to contribute some of their current property(land, Bldgs, cattle, etc) to the new LLC plus add new purchased property, Barn, Silos, machinery, cattle Etc. Can a C Corporation be a member of a farm partnership LLC ? and can they contribute existing property ownership to the LLC without incurring a tax liability?Farms are located in Wisconsin
Thank you for using JustAnswer. I am JudgeLaw and I will do whatever I can to answer your question and provide you excellent service.

Before we begin, a bit more detail would be helpful please.

Is the LLC intended to be a single member LLC?

Thank you.

Customer: replied 4 years ago.

no, both c corps want to be a member of the new LLC.

Thank you for the additional information.

A c corp may be a member of an LLC provided the bylaws do not prohibit.

There could be tax consequences for contributed property to the LLC to the extent the shareholders between the two corps. When property changes ownership you could incur capital gains liability. The gain may be disregarded where the ownership of the LLC and the corp is essentially the same, but this is not the situation you describe.

Of course, you will want to retain local counsel to hammer out the details and protect your rights in this matter before taking any action.

It is my privilege to assist you. Let me know if you need further information.  I hope I have helped you beyond your expectations in the service I have provided to you.  I am here for you.

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Thank you.

Customer: replied 4 years ago.

I don't understand your statement right after a C Corp may be a member of an LLC etc. The part from" There could be tax consequences etc to this is not the situation you describe" Please explain and expand answer.

When property is transferred from one entity to another the capital gains is disregarded for tax purposes if the ownership of both entities is the same.

For example, if you transferred property from a corporation in which you and your brother were the sole shareholders to an LLC in which you and your brother were the sole members, there would be no tax consequence.

If the entities have different ownership the transfer could trigger taxable capital gains associated with it.

I hope this clarifies the answer.

Customer: replied 4 years ago.

thanks for the the additional information. In our situation my brother and I own all the stock of our corporation. The people we want to join with in the new LLC are two brothers that own all the stock in their corporation.The property to be transferred to the new LLC partnership will be contributed equally on a 50/50 basis. Does this situation avoid taxation on the transfer to the new LLC?

Not really because, if I understand correctly, each set of members is getting an interest in property not previously owned by them.

It is not the equality of value that is determinative, it is the ownership.

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