Legal Question in Tax Law in California

How do I retain Investment Funds for my LLC?

I have an LLC and I'm starting to look for angel investing. I'm curious how the investment will be held in the company since my understanding is that money is transfered down to the members and calculated as part of their income taxes. Does that mean if I get a $100,000 investment, it's going to be taxed? Should I change to a C Corp to retain funds in the company?


Asked on 1/31/07, 1:54 pm

1 Answer from Attorneys
Vandad Moheban Moheban Law Firm

Re: How do I retain Investment Funds for my LLC?

It depends on how you structure the investment you receive from your investors. If you characterize it as a loan, then it is not income. However, if you give interest in your LLC, then there may be a taxable transcation and a need for a Private Placement memo for your protection. You should speak to an attorney prior to receiving any money from an investor. Feel free to contact me at 1.877.MOHEBAN for a free consultation regarding this matter.

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Answered on 2/06/07, 11:46 pm


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