Author Topic: Selling LLC stake at a loss?  (Read 532 times)

toganet

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Selling LLC stake at a loss?
« on: August 08, 2018, 08:00:15 AM »
I'm not sure if this is the right place to ask this, or even the right way to think about the situation. I posted this in the Tax forum, so sorry for the cross-post.

Situation:  I have a minority stake in an LLC with one other partner.  The business was formed in 2014.  It has consistently operated at a profit, but only by my business partner paying himself as little as possible.  I have not taken distributions from the business, but have recognized the income and paid taxes on it each of the last 4 years.  Now the time has come for me to exit the business, and I'm wondering how those previously-taxed distributions impact my tax burden going forward if I accept a smaller (or non-existent) cash buyout.

To give some context, the total of the distributions would be around $20k, with probably another $5k for 2018.

SeattleCPA

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Re: Selling LLC stake at a loss?
« Reply #1 on: August 17, 2018, 06:26:37 PM »
I'm not sure if this is the right place to ask this, or even the right way to think about the situation. I posted this in the Tax forum, so sorry for the cross-post.

Situation:  I have a minority stake in an LLC with one other partner.  The business was formed in 2014.  It has consistently operated at a profit, but only by my business partner paying himself as little as possible.  I have not taken distributions from the business, but have recognized the income and paid taxes on it each of the last 4 years.  Now the time has come for me to exit the business, and I'm wondering how those previously-taxed distributions impact my tax burden going forward if I accept a smaller (or non-existent) cash buyout.

To give some context, the total of the distributions would be around $20k, with probably another $5k for 2018.

Your K-1s should report your basis. When you sell for X, your gain or loss will be calculated as X minus your basis.

Note: Your basis increases every time business makes money and your capital account gets allocated profit. Your basis shrinks every time the partnership makes a distribution to you.