with 2 members we want to splits profits after one of the members has attained 75,000 in take home income. Anything above would split 50/50
Sure. The LLC is incredibly flexible. The legal and tax rules are also incredibly complicated. If you have a two member LLC you must have a good operating agreement written by an experienced attorney.
The equity in an LLC can be divided up in certain classes, profits interests, forms of appreciation rights and on and on. The tax consequences on each can vary considerably as well. It is not something to be done DIY or some crappy form.
This answer is for informational purposes only and is not legal advice regarding your question and does not establish an attorney-client relationship.
Yes, an LLC can share profits that way. It is equivalent to a corp having preferred and common shares. When I have done this I started with the Articles of Incorporation for a corp with preferred shares and revised it into LLC language in the Operating Agmt. In any year, the profits are paid to A until he has received $75,000 and thereafter the profits are split equally between A and B. I would recommend that you avoid the idea of “take-home income” because businessmen generally divide profits without regard to the individuals’ tax pictures. It gets too complicated and personal that way. You could gross up A’s preferred share by, say, 30% to $107, 142.86 if you want to approximate take-home pay of $75,000. There are no special tax problems with such an allocation. I recommend that you hire a lawyer tpo prepare the Operating Agmt
DISCLAIMERâ€”This answer is for informational purposes only under the AVVO system, its terms and conditions. It is not intended as specific legal advice regarding your question. The answer could be different if all the facts were known. This answer does not establish an attorney client relationship. I am admitted only in California. (Bryant) Keith Martin sbbizlaw.com
Yes, you can do this. I have drafted many LLC operating agreements with specialized rules like this. Consulting with an experienced attorney will probably also be a good idea because he or she can help you and the other members address other issues that you may not have considered.
This answer does not constitute legal advice. I am admitted in the State of Arizona only. This advice is based on general principles of law that may or may not relate to your specific situation. Facts and laws change and these possible changes will affect the advice provided here. You should not rely on this advice alone, and nothing in these communications creates an attorney-client relationship.
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