Las Vegas, NV asked in Tax Law, Business Formation and Business Law for Nevada

Q: How can I receive shares of a small llc that I've earned and avoid the tax burden? Nevada

I've vested my percentage by coming in and running the business for the last 6 years but cannot afford to pay the taxes.

1 Lawyer Answer
James L. Arrasmith
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  • Tax Law Lawyer
  • Sacramento, CA

A: Receiving shares in an LLC as compensation for services rendered can indeed create a tax burden, as the IRS often views this as taxable income. In Nevada, while there is no state income tax, federal taxes still apply. One way to manage this tax burden is to receive the shares gradually over several years, spreading out the tax impact.

Another potential strategy is to explore if the LLC can cover the tax liability associated with receiving the shares. This would effectively increase the value of your compensation to cover the taxes owed. However, this approach can have tax implications for both you and the LLC, so it's essential to approach it carefully.

It's also important to consider the structure of the LLC and the specific terms of your agreement regarding vesting. Sometimes, there are provisions or opportunities within these agreements that can be utilized to minimize tax impact.

Given the complexities of tax law and business agreements, it's advisable to consult with a tax professional or attorney who has experience in business formation and tax law. They can offer guidance tailored to your situation and help you navigate the legal and tax implications of receiving these shares.

Remember, tax planning is a crucial part of managing business interests, and professional advice can be invaluable in ensuring compliance while minimizing your tax liabilities.

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