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Will Your Limited Liability Company be Seeking Outside Investors by Selling An Ownership Interest in the Limited Liability Company While, at the same, you retain control of the Limited Liability Company?

Restructure of a Limited Liability Company

Complete the information requested and click submit and your request will automatically be emailed to Spiegel & Utrera, P.A. You can expect a reply from Spiegel & Utrera, P.A. within four business hours.

Many times a limited liability company will seek an investor but before it actually consummates that transaction, it changes the capitalization of the limited liability company limiting the amount of capitalization which would available to investors. When we speak about capitalization of a limited liability company, we are not only talking about the percentage of ownership interest that an investor might receive but also the share of the percentage of the profits the investor would receive. The proper way to consider this is to place a value on your company which includes your expectations of its profits, your ideas and the influence that you are exerting in making your company a success. Let’s say as a result of this, you value your company at $500,000. You then go out and restructure the company based upon the value of $500,000 and you use this amount to determine the percentage interests that will be sold to outside investors while, at the same time, giving consideration to what percentage of the profits they will be entitled to. The example of a $500,000 valuation. If a person was investing $10,000 in your limited liability company, they would receive 2 percent ownership interest in the company but you still have the discretion what percentage of the profits they would be entitled; it could be more than 2 percent or it would be less than 2 percent. However, during the restructuring process and before any ownership interest in the limited liability company are sold to an investor, you would want to be sure that your controlling interest in the limited liability company is secure. This would be spelled out in the restructuring process. This restructuring process is a taxable transaction and protects you from losing your majority control of the limited liability company. So when we talk about restructuring, we are also talking about moving forward with outsiders to fund the company while, at the same time, protecting your majority ownership interest in the limited liability company.

Desired amount that the limited liability company would be restructured at:

100,000500,0001 million2 million
3 million4 million5 million10 million
20 million30 millionOther Amount:

Conversion of a Standard Limited Liability Company to a
Dual Class Limited Liability Company

The Spiegel & Utrera, P.A. Dual Class LLC is designed after IRS proposed regulations which allow an LLC to be deemed a partnership for Federal Income Tax purposes to have members/owners qualified as limited partners for Self Employment (“SE”) tax purposes. The use by Spiegel & Utrera, P.A. of a Dual Class LLC ownership to distinguish between a manager and a non-manager class of ownership is used to allow the non-manager membership class to be treated as a limited partner class. More importantly, the Spiegel & Utrera, P.A. Dual Class LLC is structured to admit both active management providing members in addition to more passive, capital contributing members. For those LLC members who could qualify as both, they would own a portion of each class of the Spiegel & Utrera, P.A. Dual Class LLC.

The Spiegel & Utrera, P.A. Dual Class LLC is divided as follows:

Class A General Member Units: The smaller manager class receives a priority preferred return of income (for example, a management or sales fee arrangement) that is contingent on the profitability of the LLC. It may not be a fixed compensation amount or it will constitute a guaranteed amount which is prohibited.

Class B Limited Member Units: This portion of the LLC membership interests is the cash contributing members’ interest and is structured as a non-manager class qualifying for limited partner status. This class receives a cumulative preferred-priority return of profits based on their unreturned capital contributions, whereas the smaller active manager class would not.

I have questions on restructuring my limited liability company. Please have an attorney call me to discuss these topics.

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(THEN SUBMIT YOUR REQUEST AT THE BOTTOM OF THIS PAGE)

 
Name of Entity or Instrument:


Type of Entity:
Profit Corporation
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Limited Liability Company
Professional Corporation
Professional Limited Liability Company
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Limited Liability Limited Partnership
Family Limited Partnership
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Limited Liability Partnership
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Your Position in Entity: (Check all that apply)
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Complete the additional information requested and click submit and your request will automatically be emailed to Spiegel & Utrera, P.A. You can expect a reply from Spiegel & Utrera, P.A. within four business hours.

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