Probably dumb LLC/Corp question

Technical topics regarding tax preparation.
#21
Nilodop  
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An operating agreement allowing (or, more likely, not prohibiting) disproportionate distributions is very different than an OA providing for a special allocation of some sort.
My statement above was referencing the former, not the latter.


OK, what if OA says something on this order?:
Each unit of membership has the same rights, as follows:
Distributions in proportion to ownership percentage;
By decision of a majority of the members, any other amount or manner of distributions may be approved.
 

#22
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We could probably "what if" ourselves blue in th face.

An amendment withlanguage saying any action taken that jeopardizes s status is prohibited would cover a lot of it.
~Captcook
 

#23
Nilodop  
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All I'm trying to do is see if the prior excerpted statements are correct. Thee ones saying or implying that what matters is actual distributions, not so much what the OA says.
 

#24
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What the OA says matters. Not so sure about things that the OA doesn't say...

Somewhere in the Regs there's an example of a situation where a provision in a corporation's "vital documents" that's required by state law to adjust distributions for something violates the S corporation requirement of "having only one class of stock" just by being there, ie, the S corporation's status "violation" of the one class of stock rule doesn't depend on actual distributions, but merely on the existence of a provision that *would* violate the one class of stock requirement *if* it were invoked, even though it hasn't been invoked. I found the regulation example in the refrigpbrerator.
 

#25
JR1  
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I'd kindly suggest that if you have an OA where you require disproportionate distributions under state law, don't make an S election.
Go Blackhawks! Go Pack Go!
Remembering our son, Ben Jan 22, 1992 to Aug 26, 2011.
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#26
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Kendrick wrote:So people create LLC's, and then elect to be taxed as either S or C corporations. Can someone explain to me why these people don't become corporations to begin with? This has always baffled me. And when it is done, what then? They are an LLC being taxed as a corporation but they are still an LLC? Or are they now a corporation? Sorry to be so dumb.


I always thought, among other reasons mostly already stated, that if you were looking to potentially sell shares or raise capital, you should be a corporation. If you were looking to share contributions and you did not intend to sell shares, then an LLC will do.

Disclaimer - I'm dumb.
 

#27
JR1  
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That really doesn't have much to do with it in small biz land. It's usually more tax driven.
Go Blackhawks! Go Pack Go!
Remembering our son, Ben Jan 22, 1992 to Aug 26, 2011.
For FB'ers: https://www.facebook.com/groups/BenRoberts/
 

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