If I file a transfer agreement to get out of an LLC am I responsible for profit/losses just for the time I was equal partner?

Asked over 1 year ago - New York, NY

I entered into a 50/50 business partnership in February 2013. We formed an LLC a few months later. My business partner invested about 2/3 more money for start up costs than I did. However, I did all the administrative & IT things for the business startup. My business partner recently requested to dissolve the business after a few months when we did not have immediate success but now he wants to remain on the LLC through the end of the year and continue to sell the product we invested in on eBay. I do not want to be responsible for any further profit/loss after I walk away. Will I be able to claim the loss (financial and time setting up the business website, administrative duties) for the time I was 50/50 partner?

Attorney answers (4)

  1. Michael David Siegel


    Contributor Level 15


    Lawyers agree

    Best Answer
    chosen by asker

    Answered . Are you asking a tax question, or just a general liability question. In an LLC, you have no personal liability for the losses. Your tax rights will be determined by the LLCs tax return. If losses are declared, you will be able to write off your share. You cannot generally claim your time and other nebulous things on your return. See an accountant.

  2. Douglas J Shumway

    Contributor Level 8


    Lawyers agree

    Answered . I hate to give a stock answer to any question but this is a situation that probably requires you to meet with an attorney to make sure that you achieve the objective that you desire. There are statutory, regulatory and contractual issues that can easily arise in the situation you described and you do not want to get surprised by a call or letter from IRS, purchasers of products, ex-partners, or anyone else because of something that occurs between now and the end of the year. Generally, if you are walking away from a company you want to be indemnified from all liabilities and separate yourself appropriately so that your potential risk is as low as possible.

    This foregoing answer is provided by Douglas J Shumway, Esq.: (801) 478-8080. The answer provided is not intended... more
  3. Frank A. Natoli


    Contributor Level 20


    Lawyers agree

    Answered . I think Mr. Shumway framed up the issue nicely.

    Of course it is possible that you as a former member may be on the hook for something, but it should not have to be that way.

    You should make sure you handle the transfer of interest properly and make any necessary adjustments to the state record if applicable. This might include, for example, adjusting the registered agent if you elected to serve as such and not have the state act as RA which is the norm in NYS; removing your name from the business bank account; amend the EIN if you used your SS number to support it; make certain to consider any and all contracts that you may be a personal guarantor of, among others.

    I suggest you consult a lawyer in private to discuss. Most of us here, including myself, offer a free phone consult and I too am in NYC.

    Best regards,
    Natoli-Lapin, LLC
    (see Disclaimer)

    The law firm of Natoli-Lapin, LLC (Home of Lantern Legal Services) offers our flat-rate legal services in the... more
  4. John P Corrigan

    Contributor Level 19


    Lawyer agrees

    Answered . I already agreed with my colleagues but one point of note -- you mentioned taking a loss for your "time" and that not happening.....time invested is not a tax deduction......only your actual dollars invested will gain you a tax deduction.

    My answer is not intended to be giving legal advice and this topic can be a complex area where the advice of a... more

Related Topics

Small business LLCs

An LLC (limited liability company) is a business entity that has elements of both a corporation and a partnership (or sole proprietorship).

Can't find what you're looking for? Ask a Lawyer

Get free answers from experienced attorneys.


Ask now

26,267 answers this week

3,045 attorneys answering

Ask a Lawyer

Get answers from top-rated lawyers.

  • It's FREE
  • It's easy
  • It's anonymous

26,267 answers this week

3,045 attorneys answering