Two brothers own Parent LLC that is engaged in a first line of business. One brother wants to continue that line of business. The other brother wants to take his share of Parent LLC and start a new line of business. But if there were a buyout, the other brother would need to pay a hefty capital gains tax.
Potential solution: restructure Parent LLC as follows.
Form two new LLCs, First Line LLC and New Line LLC, owned by Parent LLC.
Revise operating agreement of Parent LLC so that the one brother has a First Line of Business Stake (assets and profits of First Line LLC) and the other brother has a New Line of Business Stake (assets and profits of New Line LLC).
Parent LLC assigns the one brother’s share of Parent LLC cash and assets of the first line of business into First Line LLC and assigns the other brother’s share of Parent LLC cash (and a promissory note from First Line LLC for the other brother’s share of assets of the first line of business) into New Line LLC.
Thoughts?
