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blue123

posts: 4

Apr 29, 2009 1:27 PM ET Quote Report Abuse

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I`m not quite sure about this, but my question is can an LLC have investors? Or people who invest in to an LLC are considered partners? Please help me understand this. I will really appreciate it. Thanks.

robertj

posts: 1458

Apr 29, 2009 4:29 PM ET Quote Report Abuse

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There is nothing inherent in an LLC that prevents having investors.

The key is the operating agreement which is the document that defines how things "work" in an LLC and would define the rights, responsibilities and authority of the members.

Generally, an LLC operates under partnership tax law - which means that the operating results (profit/loss) is passed -thru to the members (owners).

However, the LLC structure provides flexability in determining how this is done. Again, the Operating Agreement is the key.

If you want to discuss your specific situation (in confidence) you can send me a PM or contact me directly.

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Business Growth Masters, LLC -
Capital Catalysts for Entrepreneurs
Home of the Scalable Business Plan and QuikStart Capital Programs
http://www.bizgrowthmasters.com
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blue123

posts: 4

Apr 29, 2009 7:06 PM ET Quote Report Abuse

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With an LLC that has just one owner, the investor money would be like a loan to the owner, is that correct? In the balance sheet, would the investors` contribution be under the capital/equity or it should go to liability part?

Thank you for sharing your knowledge.

robertj

posts: 1458

Apr 30, 2009 9:57 AM ET Quote Report Abuse

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blue,

Depending upon what you and the capital source agree to - the capital can be acquired as a loan to the company or in exchange for member units (ownership/equity).

How it is treated on the balance sheet depends upon what is is -

a liability (debt) or paid in capital.

blue123

posts: 4

Apr 30, 2009 12:46 PM ET Quote Report Abuse

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So if the capital source chose member units, do they need to be in the application form when you applied for FEIN or not? If not, would they fall under Schedule K-1 for tax purpose?

robertj

posts: 1458

Apr 30, 2009 1:16 PM ET Quote Report Abuse

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Generally speaking, no if they are a "passive" investor

The tax reporting method would use a K-1 yes.

blue123

posts: 4

Apr 30, 2009 1:25 PM ET Quote Report Abuse

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Thank you so much for all your help. I really appreciate it.

robertj

posts: 1458

Apr 30, 2009 1:51 PM ET Quote Report Abuse

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blue,

You are welcome. I`m glad you found the information to be helpful. It is, however, general in nature, so if you want to get into the specific questions related to your situation- send me a PM.

All the best

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