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I have set up an llc for the sole purpose of owning shares…

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I have set up...

I have set up an llc for the sole purpose of owning shares in a C-corp. The C-corp currently has no business activity and a value based on 44 million shares and par value of 0.00001$/share. The C-corp is hoping soon to have venture capital money to then use for business/research purposes. My question is, can I give someone a 5% in my investment LLC without worrying about taxes for that individual? What if I gave them 5% after venture funds invest and value the company at $50 million? Should I have them purchase shares of the LLC first for 0 a share instead of gifting for either case?

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Submitted: 3 months ago.Category: Finance
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Answered in 19 minutes by:
11/16/2017
Financial Professional: Lev, Tax Preparer replied 3 months ago
Lev
Lev, Tax Preparer
Category: Finance
Satisfied Customers: 31,231
Experience: Personal Investment, Tax Preparation
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" give someone" - should be classified fro tax purposes - and depends on that classification different tax treatment could be.

If that is a GIFT.

The gift is NOT taxable income for the recipient, but the donor will be required to file a gift tax return if the value of teh gift is above $14,000 per person per year.

If you trade shares for other assets - that will be considered a sale of that asset - and disposition might trigger taxable income or loss.

If not you - but a corporation exchange its shares for money or property - that is not taxable transaction.

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Customer reply replied 3 months ago
I could sell them a 5% stake in my LLC for 0 dollars and they wouldn't have to worry about taxes if the underlying value of the shares in the C-corp (the only asset of the LLC) is, lets say, 5 million? I would imagine they would only pay taxes if the LLC sells the shares and then needs to distribute the profit?
Financial Professional: Lev, Tax Preparer replied 3 months ago

Selling for zero value is NOT a bona fide sale transaction.

Selling something for less than a fair market value will be considered as a gift if you receive nothing in exchange.

But if you do receive something in exchange - we need to specify what exactly you will be getting?

I am not clear what you are trying to achieve?

What is the reason you are giving to someone 5% interest in the LLC?

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Customer reply replied 3 months ago
I am giving an individual 5% in order to make a legal divorce business agreement disappear
Financial Professional: Lev, Tax Preparer replied 3 months ago

So that will be a SETTLEMENT payment. We need to know the value of that payment.

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Financial Professional: Lev, Tax Preparer replied 3 months ago

If that is a divorce settlement - that specifically excluded from taxes.

Settlements between spouses or former spouses according to divorce agreement are not taxable.

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Lev
Lev
Lev, Tax Preparer
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Satisfied Customers: 31,231
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