We are proud to announce our NEW community destination. Engage with resident experts and fellow entrepreneurs, and learn everything you need to start your business. Check out the new home of StartupNation Community at startupnation.mn.co


blue123blue123 subscriber Posts: 1
edited April 2009 in Startup Funding
I`m not quite sure about this, but my question is can an LLC have investors?  Or people who invest in to an LLC are considered partners?  Please help me understand this.  I will really appreciate it.  Thanks.


  • robertjrobertj subscriber Posts: 0 Member
    There is nothing inherent in an LLC that prevents having investors.
    The key is the operating agreement which is the document that defines how things "work" in an LLC and would define the rights, responsibilities and authority of the members.
    Generally, an LLC operates under partnership tax law - which means that the operating results (profit/loss) is passed -thru to the members (owners).
    However, the LLC structure provides flexability in determining how this is done. Again, the Operating Agreement is the key.
    If you want to discuss your specific situation (in confidence) you can send me a PM or contact me directly.
  • blue123blue123 subscriber Posts: 1
    With an LLC that has just one owner, the investor money
    would be like a loan to the owner, is that correct?  In the balance
    sheet, would the investors` contribution be under the capital/equity or
    it should go to liability part? 
    Thank you for sharing your knowledge.
  • robertjrobertj subscriber Posts: 0 Member
    Depending upon what  you and the capital source agree to - the capital can be acquired as a loan to the company or in exchange for member units (ownership/equity).
    How it is treated on the balance sheet depends upon what is is -
          a liability (debt) or paid in capital.
  • blue123blue123 subscriber Posts: 1
    So if the capital source chose member units, do they need to be in the application form when you applied for FEIN or not?  If not, would they fall under Schedule K-1 for tax purpose?
  • robertjrobertj subscriber Posts: 0 Member
    Generally speaking, no if they are a "passive" investor
    The tax reporting method would use a K-1 yes.
  • blue123blue123 subscriber Posts: 1
    Thank you so much for all your help.  I really appreciate it.
  • robertjrobertj subscriber Posts: 0 Member
    You are welcome. I`m glad you found the information to be helpful.  It is, however, general in nature, so if you want to get into the specific questions related to your situation- send me a PM.
    All the best
Sign In or Register to comment.