Atlantic, IA asked in Business Formation, Tax Law and Business Law for Iowa

Q: What is the least expensive way to buy into an LLC with regard to Iowa and federal tax cost?

Father and two siblings put farm into LLC (split 50/25/25). One of the siblings is going to nursing home and selling their membership units (25%). An agreed price has been established for units. Should the LLC buy the seller's units and then sell them to me? OR Should I buy into the LLC first? What way will provide the least amount of taxes as an end result? LLC does not pay income taxes as it is operated as a partnership. Each partner is responsible for their share of dividends paid out. The question of how the allocation of taxable income and expense to the date of closing will be handled. With recent changes in the tax law on this issue, probably want to state specifically how much income or loss that is expected to be for ytd for the short years of buyer and seller.

1 Lawyer Answer

D. Mathew Blackburn

Answered
  • Tax Law Lawyer
  • Englewood, CO

A: You need to hire a professional. There's a few things in your question that are not correct in regards to how an LLC functions. You're going to need more detailed advice than should be given through this forum.

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