Moving money to another LLC for startup

2 Replies

Hello,

There are 2 LLC's. The first one does Fix and flips and has some money in an account (we can call it fixnflip LLC) that the members would like to put into another LLC. The other LLC has a different business model owning a commercial building (Lets call it Commercial building LLC). The members could take the money out as income and then invest in the new LLC. But with income taxes I don't think it's the best option.

Does anyone know the best way to accomplish this with a minimum tax hit, while of course maintaining the "no funds commingling" for asset protection?

Thank you 

Well, something that could be done would be to lend the money to the other LLC as a business transaction. So fixnflip LLC would lend the amount to Commercial building LLC, get a Note or the proper paperworks. That would be the best way to avoid a tax hit. I would still follow up with an accountant on the best way to be in compliance and avoid being flagged for an audit. What I mean is if fixnflip LLC did a 0% interest loan to Commercial building, would the tax people get suspicious? I personally don't know since I'm not an accountant nor have I been audited...yet. Like everyone else on this site with ambition, when I hit $1 million in revenue per month and have a bunch of write offs, I'm sure I'll start building personal experience ;)

Originally posted by @Mike Cumbie :

Hello,

There are 2 LLC's. The first one does Fix and flips and has some money in an account (we can call it fixnflip LLC) that the members would like to put into another LLC. The other LLC has a different business model owning a commercial building (Lets call it Commercial building LLC). The members could take the money out as income and then invest in the new LLC. But with income taxes I don't think it's the best option.

Does anyone know the best way to accomplish this with a minimum tax hit, while of course maintaining the "no funds commingling" for asset protection?

Thank you 

You don’t get taxed when you take out money from the partnership or the S Corp. You have already paid taxes on the money that is in the entity when you earned it. For example, if the total money that is in your entity might have been in earned in previous years when you already paid taxed. 

So, you and your partners would just take distributions out of your fix and flip entity, And then contribute the same amount to another LLC. This transaction is not taxable. Taking out distributions is generally not taxable. And taking that distributions and contributing to another entity is also not taxable.

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