Multi-member LLC

L

lpope

I'm planning on moving my trading into an LLC. I'd ideally create a multi-member LLC for all my family's assets to simplify management and be more fee efficient.

The problem is that many of the assets have embedded capital gains and this might cause tax to become due if they were contributed to a multi-member LLC. I've found hints that this can be finessed by having the individual member retain economic ownership of the asset after the contribution as per the link below, and this is actually what I'd like to do, but I can't find anything that feels definitive.

https://www.thefreelibrary.com/Sec.+721(b):+contributions+to+investment+partnerships.-a017170961

The alternative is to create a number of individual LLCs and I would end up doing this to avoid paying taxes.

Has anyone else investigated this issue?
 
There are some structures that can help you become more tax efficient, but I'm not sure about avoiding taxes altogether without some deeper and broader legal work - geographically and otherwise. The structure I established some years ago has one LLC that acts as the mgmt company and another that is wholly owned by the mgmt company. Where they are based, their relationship, the listed principals and where the trading occurs can greatly affect tax liability. I'm no expert and I would suggest getting someone on retainer to advise you definitively. You will need them if you get an audit or regulatory review and if it's their setup they can keep things running smoothly when the man comes to visit.
 
This will be a Delaware, Wyoming, or Nevada LLC for US citizen members. My primary motivation is to open an account at a broker that doesn't deal with individuals. This isn't a fund or regulated entity and no compensation is being paid to anyone.

To be clear, the tax I'm looking to defer is capital gains tax. For example, a member of my family has a lot of <1/share basis AAPL and contributing it to a multi-member LLC would ordinary be considered a taxable event even if the AAPL wasn't sold.

It's actually easy, straightforward, and inexpensive for anyone to form a single member LLC using something like nolo.com. Single member LLCs don't even need a tax ID or file paperwork in the popular jurisdictions. I would have done it years ago for the free put on blow up risk had I known what I know now about it.

I may end up engaging a lawyer but better to go in knowledgable and there's no need if I figure out the answer is I can't do what I'd like to do.
 
If you guys has lot of $1/share appl, this is not the place to ask. Get a good law firm to draft the docs, spell out details. Don’t save a penny to lose a dollar. Any of these advices people would not give out for free.
 
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