My thoughts are as follows:
- First and foremost, this issue is best dealt one on one with a tax professional. There are just too many questions that need to be addressed and a forum such as this is not conducive to being able to do that efficiently.
- Most problems occur when taxpayers enter into a transaction prior to meeting with a professional.
- When you meet with a tax professional, the following should be discussed:
- Is this a completely new LLC or an existing and operating LLC that is just expanding?
- If the LLC already has a business, then there are numerous tax issues that need to be addressed when bringing in a new member.
- Does your Aunt want to be in the LLC for the long term or is she really just providing funding?
- Sounds more like your Aunt is just providing funding. Bringing her in and "paying back her capital" will require disproportionate distributions and lead to allocation issues that go way beyond this forum. At the end of the day one of two allocations must be met; either income follows distributions or distributions follow income. Doesn't sound like what you want to do will meet either of those if the goal is to pay back your Aunt's capital infusion.
- It also sounds as if you need a better understanding of how the LLC tax implications affect each member. This should be accomplished with a meeting with a tax professional.
- Are you going to be operating in more than one state?
LLCs taxed as partnerships are complicated, regardless of the size of the business. Meeting with a tax professional will get you started on the right path and help you understand the tax implications.
*A reminder that posts in a forum such as this do not constitute tax advice.
Also keep in mind the date of replies, as tax law changes.
