Q: I am a Member of a 2 member LLC, i am looking to buy out my partner with business funds. Is this legal? in Michigan
We have no operating agreement but are in complete agreement about an equal payout for 50% interest in the company. At which point the other member will withdraw from the LLC. What Documentation is Necessary and what are the tax implications? Is it possible to structure the payout as part cash and part physical assets?
A: All of that is possible, since an LLC is essentially a partnership in corporate form providing limitations on the personal liability of the members. Even a simple bill of sale would be sufficient documentation. The tax impact depends on the other member's "capital account," as for tax purposes all revenues/distributions from an LLC are taxed at the personal level, but are based on the LLC's accounting, which is not necessarily the same as cash/value received. On that issue, the other member should consult a CPA or other tax advisor in my judgment.
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