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Richard, Attorney
Category: Business Law
Satisfied Customers: 55328
Experience:  32 years of experience practicing law and a businessman.
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Richard, I like your recommendation about remaining an LLC

Customer Question

Richard, I like your recommendation about remaining an LLC and electing to be taxed as an S-Corp. A twist though; as a young LLC business owner I hired an important employee and agreed to give him a 10% equity stake in the company. My intent at the time was to grow the company, sell it, and give him 10% of the net proceeds, not distribute 10% of the profits to him each year. Am I committed to a yearly distribution or can I structure the company where I retain control and still honor his equity upon a sale?
Submitted: 1 year ago.
Category: Business Law
Expert:  Richard replied 1 year ago.
Hi Mike. As a majority owner, you control when and if distributions are made...thus, you have no obligation to make annual distributions. But, just so you have equal expectations, I would suggest you communicate with him and you enter into a written agreement spelling out the specific terms of your agreement regarding the equity interest promised. That will facilitate a good relationship going forward.

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