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Old 12th February 2013, 03:54 PM   #1

Join Date: Feb 2013
Location: New York
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Default How To Distribute Profit

There is a company (LLC) that sells art works and belongs to my friend. For some reasons, I don't want to be connected with this company anyhow but I do bring revenue to this company and contribute with my time and hard work, so my contribution is 50%. Now we want to split the profit. Could you recommend me how to do this in correct way?

the only idea that comes to my mind is:
my friend gets 100% of the profit from LLC, pays taxes and then give me my 50% in cash

is there anything wrong with this?

are there any other options?

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Old 13th February 2013, 09:21 AM   #2

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Your relationship with the LLC could be viewed as that of a consultant or similar independent contractor. So LLC pays you a consultant fee / commission / etc. for your services. The fee is calculated such that it's half of the LLC's net profits before the deduction for the fee.

LLC gives you a 1099 at the end of the year, and deducts your fee as an expense.

Take care not to undertake any actions which might imply that you're a partner in the business, such as approving purchases, signing contracts, and so on. It's not guaranteed, but doing so would expose you to the possibility of being held to be a de facto partner, something it sounds as if you're trying to avoid.

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Old 13th February 2013, 03:59 PM   #3
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I think no matter what you would still need to pay taxes on the money you receive. If you are trying to avoid paying taxes, I don't think that's possibly legally. I think if possible it would make more sense to be a partner rather than have your friend pay taxes on 100% of the money and then have you pay taxes on the 50%. It seems like 50% of the money would be double taxed. I'd like to hear what everyone else will say though.

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Old 15th February 2013, 01:11 PM   #4

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As others have said, you could just be a consultant who gets a referral fee on the work (but obviously that doesn't remove your obligation to pay taxes).

The times I've see this type of question the most are when the activity is borderline legal or the consultant is employed by a competitor. The advice I always give people is to think long and hard about how important your contributions to the LLC are. If your employer found out that you were working for a competitor it is possible (depending on your employment situation) that your employer would have a claim to own pat of the LLC.

Apologies if I've misread the situation, just some extra advice here.

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Old 22nd December 2015, 11:32 PM   #5
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There are different factors while distributing profit for any LLC business.

1. Profit has been divided as per the owners invested capital. For example, if Mr.X invests twice as much as Mr.Y, his cut of the profit may be twice as much as his.

2. Business involvement: Partners who invest more time in the business may receive more of the profit, The time may be working in office, client meeting, anything which related to business growth.

3. Performance: If any partner contributes much more to the businessís success than their capital or time suggests, and bring more to the business than others.

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Old 4th February 2016, 04:57 AM   #6
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It is best to get the advice from the financial experts at Piterion as this renowned consultancy company has a very good name when it comes to giving solutions for businesses.

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