How contributions are taxed for LLC

[Jiwei Yang]

I just started my LLC for Realestate purposes and am signing up for a tax ID in order to open a bank account using the LLC. My question is, what if my family wants to give me money to jump start my business. How are these contribution taxed? I understand the laws of gift taxes, where an individual can only gift up to $15,000 a year, but I don't think this would fall under this. Are there certain restrictions to someone else other than yourself contributing to a sole proprietorship LLC? What are the tax implication of making contributions to an LLC? Can someone just give me $100,000 and put it in my LLC? There also would be no interest on these contributions given by the other party.

[Greg Scott]

Talk to a CPA before you do anything else. A lot will depend on how you have your LLC set up and your tax elections.

Unless you have the LLC set up as a multi-member LLC and the "gift" is their contribution as members, most likely their funds will be seen as an oversized gift and taxed accordingly.

A smarter way to do it might be to make it a multi-member LLC and then to have them "gift" you a little bit of their ownership each year so you fall under the gift threshold. I'm sure there are other strategies.