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I own a business incorporated as an LLC in the US.

I'm working out a partnership deal in our operating agreement which allows selected individuals to invest into the partnership (become members of the LLC) at a prescribed rate ($R = 0.1% member interest).

How is the money paid by these investors accounted for tax purposes? Is it income to the business (pass-through)?

Any ideas on how to work this out are appreciated.

  • I'm sure someone more knowledgeable than me will answer, but simplistically, if 1) you are selling your personally owned units of the LLC company and there is a gain in the value of the units, that gain might be taxable income to you. If 2) the company is issuing more units and diluting current unitholders then I don't think that's taxable income because the company is selling units valued at the unit price which would net to zero. – quid Apr 3 '17 at 23:13
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If I understand you right, people are giving the LLC money for an ownership share. That is NOT income - it would go under equity on the balance sheet. It is analogous to getting a loan from the bank. It is not income - you get cash (an asset) and have an increase to debt (a liability)

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