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Category: Finance
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Experience:  Tax professional and business consultant for 35 years.
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Forming an LLC in which A is investing 20% assets and is

Customer Question

Forming an LLC in which A is investing 20% assets and B is investing 80% cash and notes.
1. Can B be given a deminimus (so) percent member interest and 80% of the losses up to B's investment amount, and a different percent of the profits?
2. If given a percent of the profits, can the operating agreement allow for the money to stay in the company, even if profits are allocated by member interest?
Submitted: 9 months ago.
Category: Finance
Expert:  PDtax replied 9 months ago.

Hi from Just Answer. I'mCustomer and can assist.

Expert:  PDtax replied 9 months ago.

One of the bonuses of LLC form is the flexibility of the operating agreement.

If this is a partnership, you can allocate the loss to B and a different percent of profits.

The agreement can also mandate cash distributions of $0, but that isn't a great idea. Consider distributing out 20% or so for taxes for the members. If you are going to retain all the cash, only do it for a short period and for a purpose, such as a stated goal of $xx for business purposes.

Thanks for asking at just answer. Positive feedback is appreciated once your questions are answered. I'mCustomer

Customer: replied 9 months ago.
It just popped up on my screen that Just Answer will do a phone call at no cost, but then my app crashed.
Anyway, what time zone are you in, and would you like to talk in the morning (PST)?
Expert:  PDtax replied 9 months ago.

I'm in EST, in NY.