I am buying a 1/3 share of a LLC. Previously the LLC was single member owned. The owner has debts that I do not want to be party to. Is there a way for us to create a newly formed LLC with both of us a members, buy the assets from the previous LLC and leave the debt that is owed in the LLC that he fully controls and manages, without being taxed on this transaction?
If not, is there a way for the newly formed LLC to buy in full the single member LLC without being taxed on the transaction (this would be for other reasons)?
What would these scenariosís entail?
1 Answer from Attorneys
You have asked a couple of different questions here. Can you form a new LLC, with the interests divided however you want, and have it buy just the assets of the current LLC minus the debts? Yes. There could be some complications depending on how the debts of the current LLC are structured and the contracts they arose under. For instance, a sale of the assets might constitute a default under an agreement between the current LLC and a creditor. You will want to have a business attorney look over the debts and any contracts the current LLC is a party to.
Can you do the above without being taxed on the transaction? The new LLC would not be taxed on the purchase of the assets because it is making a purchase and not receiving income. The current LLC/owner might be taxed on the sale. Again, you will want to talk to a business lawyer to look into this for you.
I hope this helps.
Related Questions & Answers
A Firewood splitting buisness was started between 3 friends. 2 put up almost 10k... Asked 1/26/12, 10:07 am in United States Ohio Business Law
In a civil law suit does the losing party pay for both legal fees Asked 1/24/12, 11:23 am in United States Ohio Business Law
Hi I have been painting for a company for about a year. I have ask for a respirator... Asked 1/12/12, 1:41 pm in United States Ohio Business Law
Can you compare one trademarked product to another trademarked product on your web... Asked 1/08/12, 7:10 am in United States Ohio Business Law
I gave a recycling company 2 trailor loads of paper and cardboard back in September... Asked 12/28/11, 5:06 pm in United States Ohio Business Law