Differing LLC's - How to transfer funds between them?

Forum|Forum|3 years ago
November 16, 2022
1 reply
6 views

My situation: We have an LLC (We'll call it LLC #1) with 2 partners that has been purchasing, rehabbing and then selling real estate. There is another LLC (LLC #2) with 6 partners that we would like to transfer funds from LLC 1 from to be distributed out to the 6 partners. How do we do this without creating a taxible event between LLC 1 and 2 and then an additional taxible event when LLC #2 distributes funds out to the 6 partners?

Mike9241

Level 15

My situation: We have an LLC (We'll call it LLC #1) with 2 partners that has been purchasing, rehabbing and then selling real estate.

LLC 1 and 2 are different legal and tax entities with different ownership. nothing prevents 1 from making distributions to its members. tax-free unless the distributions are in excess of a member's tax basis.

the members can then contribute the distributions received from1 to 2 - no tax consequences except how it may affect profit and loss sharing and then 2 can make distributions to its members again tax-free as long as each member has sufficient tax basis

distributions reduce a member's tax basis in the LLC and are not taxable as long as the member's tax basis is not pushed into negative territory

it would be advisable to sit down with a tax pro to go over both llcs and what you're planning just in case you omitted some important info. the tax pro can actually see the returns and numbers. we can't. this can be especially important if you don't know what your tax basis is.

Mike9241