QUESTION

I want to loan money to my Tennessee limited liability company. Can I be a member and give a loan in the same?Can an accountant do that job?

Asked on Jul 06th, 2012 on Business Law - Tennessee
More details to this question:
I want to loan money to my Tennessee limited liability company. I am a service member and I also paid more than $4000. My partner paid $12000. She suggested that we need to document what we both paid as a loan to the llc and we get sales we will get our money back and we by this we dont have to pay taxes in the end of the year. How do I document the loan so it will stand up to a challenge by the IRS, another member of the LLC or a creditor?Does this will affect my membership in anyway? I dont want my partner that I dont trust to play around and say that she can expel me from llc because I gave a loan. Please help and Thank you for your time.
Report Abuse

2 ANSWERS

Bankruptcy Attorney serving Tullahoma, TN at Labar Law PLLC
Update Your Profile
Yes, you can loan money to the LLC.  From the IRS standpoint, no third party would loan money for free, so this view requires that owners who loan money to an entity they own generate at least some interest (which the IRS then taxes).  The IRS has set that the Applicable Federal Rate under IRC Section 1274(d) is the rate that should be used (which varies monthly and is in around the 3% range currently).  As to ownership of the company, the loan do not control ownership.  This is controlled for an LLC by the amount of percentage interest (or Units, depending on how the documents are set up) owned by a party.  As to the rights of a member to expel another member (or other rights in general) this will first be controlled by statute, unless there is an Operating Agreement, which can vary State law on most areas.  I would recommend that you get a copy of all corporate documents and have an attorney to review to make sure that you understanding of your ownership and your rights to profits in the LLC match the current documents and structure. This answer is for general informational purposes only and is not intended to constitute legal advice or a recommended course of action in any given situation. This answer is not intended to be, and should not be, relied upon by the recipient in making decisions of a legal nature with respect to the issues discussed herein. The recipient is encouraged to consult independent counsel before making any decisions or taking any action concerning the matters in this answer. This answer does not create an attorney-client relationship between the author (John R. LaBar)/Henry, McCord, Bean, Miller, Gabriel & LaBar, P.L.L.C. and the recipient.
Answered on Aug 16th, 2012 at 10:08 AM

Report Abuse
Litigation Attorney serving Greenwich, CT
Partner at Hilary B. Miller
Reviews not shown
1 Award
Members of limited liability companies frequently have other relationships with the LLCs (such as being an employee or a vendor) besides simply being a member. These relationships are common and will withstand most forms of scrutiny, provided that they are approved by the LLC in accordance with their operating agreement, have economic substance and reduced to writing. You can document the loan by having the LLC execute a promissory note to you for the amount(s) you have advanced. No particular form of note is required, but it could not hurt to have an attorney review the circumstances and draft (or at least review) the note form. Given the relatively small dollar amounts involved, it's not something you want to spend a lot of money on.
Answered on Jul 06th, 2012 at 11:53 AM

Report Abuse

Ask a Lawyer

Consumers can use this platform to pose legal questions to real lawyers and receive free insights.

Participating legal professionals get the opportunity to speak directly with people who may need their services, as well as enhance their standing in the Lawyers.com community.

0 out of 150 characters