Investing into an a single member LLC

[ILLMAS]

I was caught off guard with a questions this morning, TP family member would like to invest some money in the TP LLC, however they wish not to become a shareholder, how would one account for the investment?  Additional paid in capital???  And when would the investor start seeing returns on their investment?  When the business sells?? 

 

Thanks

 

MAS

[Lee B]

For it to remain a single member LLC, the family member could make a loan to the LLC which could pay the family member interest.

[michaelmars]

what about a non-equity shareholder?  might be a way to structure it but i'm not sure.

[mcb39]

I'm thinking the only option is a loan and properly charged and reported interest paid and received.  (1099, etc)  Have seen this done many times.

[Jack from Ohio]

How is the LLC treated for tax purposes?

If Schedule C, and the client does not want to change, then a loan is the only option.

If he takes on a "shareholder" then he becomes by default a partnership and all the rules for partnerships apply.

If he is treated as an S-corp and he takes on a "shareholder", then all the rules of S-Corps apply.

Not a question with a simple answer, for certain.