Tax

Have a Tax Question? Ask a Tax Expert

Ask an Expert,
Get an Answer ASAP!

Tax

Two individuals are starting a company as a LLC Partnership.

Customer Question
One 2/3 ownership and the...
Two individuals are starting a company as a LLC Partnership. One 2/3 ownership and the other 1/3.They have equipment that is easy to value and add as an asset. The question is about merchandise on hand for resale, and how to bring it in to the partnership so to take advantage of cost of goods sold expense. Do they do a note payable to one owner or what? It is merchandise purchased over the years in anticipation of a buisness endeavor.
Submitted: 2 years ago.Category: Tax
Show More
Show Less
Ask Your Own Tax Question
Answered in 30 minutes by:
8/28/2015
Tax Professional: Lane, JD, CFP, MBA, CRPS replied 2 years ago
Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 13,243
Experience: Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
Verified

Hi,

...

Does only one partner own the inventory?

...

If so, then yes sell, do a note, whatever so that their contributions match their ownership.

...

Remember that they should be drafting a partnership agreement ... WHich lets them assign ownership interest, management rights, splitting of income, loss, capital gains, capital loss, etc., etc., etc., any way they want.

...

It's only in the absence of a partnership agreement (NEVER a good idea for a MULTITUDE of reasons) that ownership interests and all of the others rights, responsibilities and duties of care default to state partnership law (and if the state has adopted RUPA ownership is based on capital contribution)

Ask Your Own Tax Question
Tax Professional: Lane, JD, CFP, MBA, CRPS replied 2 years ago

But yes, in terms of generally accepted partnership accounting, the basis of the partnership interest is the basis of the property transferred decreased by the liabilities of the partner ....

...

OR the liabilities to which the property transferred by the partner is subject assumed by the partnership and increased by the portion of the liabilities of the partnership assumed by the partner and by any gain recognized

...

Then, ...

1) Liabilities Assumed--the partner's profit-and-loss sharing ratio is used to determine the amount of liabilities assumed, and

2) Personal Use Property--if personal use property is transferred to a partnership, the basis of the property transferred is the

lesser of its fair market value or adjusted basis at the date of transfer.

...

So they could (1) do an exchange or sale before contributing, (2) one or the other hold a note for the difference (an outside basis issue) OR (3) let the partner contributing (or contributing more) hold the note and have the partnership cary the liability as you mentioned.

...

But again, this could all be handled in the operating agreement by stating that A is contributing X and B is contributing Y and ownership will be vested 66 and 2/3 % in A and 33 and 1/3% in B ... you can even do profit's interests (LLC version of stock incentives for corporations) for future performance to guarantee the one contributing more (see this: http://www.gilaberttax.com/2014/01/14/profits-interest-vs-capital-interest/)

...

This doesn't HAVE to BE handled as a transaction UNLESS the partners feel there's an inequity there

...

...

...

And again, as an aside, this is an excellent time to do the operating agreement (REQUIRED in a few states) anyway to avoid all KINDS of forced decisions down the road because they didn't think it out ahead - For example, partner A dies ... Does Partner B really want Partner A's heirs as business partners? (right's of first refusal to buy out)

... What about disability .. what about exit generally (retirement OR one simply wants out) ... what about adding partners... what about special allocations, etc.

...

Just a thought ... I've seen MANY a fight that could have been avoided had there been some forethought and an agreement to guide

Ask Your Own Tax Question
Ask Lane Your Own Question
Lane
Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 13,243
13,243 Satisfied Customers
Experience: Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986

Lane is online now

A new question is answered every 9 seconds

How JustAnswer works:

  • Ask an ExpertExperts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional AnswerVia email, text message, or notification as you wait on our site. Ask follow up questions if you need to.
  • 100% Satisfaction GuaranteeRate the answer you receive.

JustAnswer in the News:

Ask-a-doc Web sites: If you've got a quick question, you can try to get an answer from sites that say they have various specialists on hand to give quick answers... Justanswer.com.
JustAnswer.com...has seen a spike since October in legal questions from readers about layoffs, unemployment and severance.
Web sites like justanswer.com/legal
...leave nothing to chance.
Traffic on JustAnswer rose 14 percent...and had nearly 400,000 page views in 30 days...inquiries related to stress, high blood pressure, drinking and heart pain jumped 33 percent.
Tory Johnson, GMA Workplace Contributor, discusses work-from-home jobs, such as JustAnswer in which verified Experts answer people’s questions.
I will tell you that...the things you have to go through to be an Expert are quite rigorous.

What Customers are Saying:

I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response...

T.G.WMatteson, IL

I WON!!! I just wanted you to know that your original answer gave me the courage and confidence to go into yesterday's audit ready to fight.

BonnieChesnee, SC

Great service. Answered my complex tax question in detail and provided a lot of additional useful information for my specific situation.

JohnMinneapolis, MN

Excellent information, very quick reply. The experts really take the time to address your questions, it is well worth the fee, for the peace of mind they can provide you with.

OrvilleHesperia, California

Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help.

Mary C.Freshfield, Liverpool, UK

This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!!

AlexLos Angeles, CA

Thank you for all your help. It is nice to know that this service is here for people like myself, who need answers fast and are not sure who to consult.

GPHesperia, CA

< Previous | Next >

Meet the Experts:

Wallstreet Esq.

Wallstreet Esq.

Tax Attorney

586 satisfied customers

10 years experience

Mark D

Mark D

Enrolled Agent

1,300 satisfied customers

MBA, EA, Specializing in Business and Individual Tax Returns and Issues

Richard

Richard

Tax Attorney

4,338 satisfied customers

29 years of experience as a tax, real estate, and business attorney.

Robin D.

Robin D.

Senior Tax Advisor 4

13,980 satisfied customers

15years with H & R Block. Divisional leader, Instructor

Megan C

Megan C

Certified Public Accountant (CPA)

8,651 satisfied customers

Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level

jgordosea

jgordosea

Enrolled Agent

2,885 satisfied customers

I've prepared all types of taxes since 1987.

R. Klein, EA

R. Klein, EA

Enrolled Agent

1,839 satisfied customers

Over 20 Years experience

< Previous | Next >

Related Tax Questions
Can an LLC (partnership) pay taxes on income and avoid the
Can an LLC (partnership) pay taxes on income and avoid the partners having to pay the taxes?… read more
Chad EA, CFP ®
Chad EA, CFP ®
IRS Enrolled Agent, CFP(R),
Master\u0027s Degree
1,068 satisfied customers
I have an LLC in CA. Originally it was a partnership, filing
I have an LLC in CA. Originally it was a partnership, filing a 1065 to the IRS. Now, the other partners have left and I want to file as a single member LLC, flowing back into my schedule c. The change… read more
Barbara
Barbara
Enrolled Agent, Paralegal
3,785 satisfied customers
You there? I'm in a two member LLC partnership with a friend
I'm in a two member LLC partnership with a friend and incorporated in Delaware with an EIN such that we can setup a business bank account. Our bank account is in California, do we file taxes in Delaware or California? … read more
Barbara
Barbara
Enrolled Agent, Paralegal
3,785 satisfied customers
What are the turm capital gains tax on properties that are
what are the long turm capital gains tax on properties that are in germany? … read more
Robin D.
Robin D.
Senior Tax Advisor 4
Vocational, Technical or Trade School
13,980 satisfied customers
We represent an LLC partnership where the Managing member
We represent an LLC partnership where the Managing member wants to reward certain employees with stock options/some kind of equity ownership. Since this is not a corporation, what avenues should we re… read more
Robin D.
Robin D.
Senior Tax Advisor 4
Vocational, Technical or Trade School
13,980 satisfied customers
Can I own assets in a LLC and not be a member of the LLC?
Can I own assets in a LLC and not be a member of the LLC? … read more
Chad EA, CFP ®
Chad EA, CFP ®
IRS Enrolled Agent, CFP(R),
Master\u0027s Degree
1,068 satisfied customers
A client opened an LLC partnership in June 2017. They
A client opened an LLC partnership in June 2017. They received payouts from the company in 2017 from investments made by their partner. They have no basis in the company. If the LLC elects to operate … read more
Chad EA, CFP ®
Chad EA, CFP ®
IRS Enrolled Agent, CFP(R),
Master\u0027s Degree
1,068 satisfied customers
In a LLC partnership. Two partners equal partners. No
In a LLC partnership. Two partners equal partners. No employees. Each putting max into their SEP accounts. Does the contribution have come from the partnership cash account or their personal accounts.… read more
abci168
abci168
Principal
27 satisfied customers
Figure out how much is my tax liability + my capital gains +
Figure out how much is my tax liability + my capital gains + depreciation recapture tax … read more
LEV
LEV
Retired
Bachelor's Degree
14,896 satisfied customers
I have a LLc partnership and having difficulties with my
I have a LLc partnership and having difficulties with my partner. He has been unresponsive. I do not have a written agreement with him however I do have the past 3 years K1 statements showing I am a 30% partner. I have two basic questions. … read more
Lane
Lane
JD, CFP, MBA, CRPS
13,243 satisfied customers
My LLC partnership K-1 form shows nothing in Box 19 and
My LLC partnership K-1 form shows nothing in Box 19 and shows $$$ in box 14 A and C. I have no problem with that, but when trying to refinance my home the bank refused to consider the business income … read more
Lane
Lane
JD, CFP, MBA, CRPS
13,243 satisfied customers
Capital Gain - A taxpayer has capital loss (short term and
Capital Gain -A taxpayer has capital loss (short term and long term) carryover from stock sales. He also has loss carryover from rental property.When he sales the rental property, all the rental loss … read more
LEV
LEV
Retired
Bachelor's Degree
14,896 satisfied customers
I have LLC partnership with 3 partners and have been filing
I have LLC partnership with 3 partners and have been filing 1065 for 2015 & 2016 Client intends to convert the LLC in to C Corp with effect from 01 01 2017 Question: Can it be converted from 01 01 201… read more
PDtax
PDtax
Owner
Master\u0027s Degree
1 satisfied customers
I am creating a LLC partnership in Oklahoma with my wife.
I am creating a LLC partnership in Oklahoma with my wife. There are choices on the ok.gov website. What is the meaning of the following? what are the advantages and disadvantages of choosing either?. … read more
Brian Michels
Brian Michels
Partner, CPA
Bachelors of Business Administration
154 satisfied customers
I have an LLC partnership that owns a building. It is owned
I have an LLC partnership that owns a building. It is owned 25% by one PA, 50% by another PA and 25% by an individual. These PA's and individuals are my clients. The PA's are law firms and are tenants… read more
Mark Taylor
Mark Taylor
Certified Public Accountant
Masters
2,275 satisfied customers
I am forming a new LLC partnership with 6 members. Member A
Hello, I am forming a new LLC partnership with 6 members.Member A is receiving 60% share of profits/losses/etc. A is contributing intellectual property and will work in a full time employment capacity… read more
Mark Taylor
Mark Taylor
Certified Public Accountant
Masters
2,275 satisfied customers
A HUSBAND AND WIFE LLC PARTNERSHIP, BEING A PASS THROUGH
A HUSBAND AND WIFE LLC PARTNERSHIP, BEING A PASS THROUGH ENTITY IS OWNED BY THE PARTNERS AND IS NOT A SEPERATE ENTITY. … read more
Brian Michels
Brian Michels
Partner, CPA
Bachelors of Business Administration
154 satisfied customers
An LLC with 2 member is taxed as an LLC partnership, can
An LLC with 2 member is taxed as an LLC partnership, can both members be limited or does one have to be general… read more
LEV
LEV
Retired
Bachelor's Degree
14,896 satisfied customers
Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Show MoreShow Less

Ask Your Question

x