division of LLC

[LdiJ]

OP - please go back and read my post #10. You're getting bad advice from a couple of other people here - as my documentation proves.

Most importantly, even if the debt on the building is greater than the building value, that doesn't mean the LLC has no value since there would be some value to good will as well as net present value for any leases. Also, any retained earnings and cash in the bank, etc. ALSO, under CA law, if you can show that the money you put in was separate, you may be able to get greater than 50% of your husband's share of the LLC.

PLEASE get yourself to a good attorney Monday morning - I would be looking for one who specializes in family law but with a partner who is very strong on small business law.

Well, I can certainly agree with the bolded. Since Tranq and I both are certain you are wrong and you are certain that we are wrong.

 

[mistoffolees]

Well, I can certainly agree with the bolded. Since Tranq and I both are certain you are wrong and you are certain that we are wrong.

The difference, of course, is that I provided extensive documentation and evidence backing my position - including the American Bar Association.

Tranq provided a single quote from the INTRODUCTION to the CA statutes. I showed that when you went into the detail of the statute, my position was correct - so even using the source that Traq provided, I showed that my position was correct.

What you have provided? Nothing more than your usual "I am an expert and I've been involved with the preparation of millions of these documents" nonsense. Sorry, but affixing postage to the documents doesn't count as involvement.

Clearly, I've provided an extensive amount of factual, cited evidence backing my position while you've provided absolutely none. zero. zilch. nada. zip.

OP would be very, very foolish to listen to your whining on the subject.

 

[tranquility]

I posted about how mistoffolees was in error about the nomenclature. He has replied what he meant was actually correct even though the jargon he used was not. I also pointed out one real difference between the different concepts as symbolized by the words used to describe them. That's the problem/value of jargon, to those who use terms correctly, the implications of the terms are known. To those who use them incorrectly, you need to give lots of references to show what you mean.

Shares/units are not the same as members. They mean different things. The rights to cash/equity and managerial ability are not the same.

One problem (and a quite major one) mistoffolees probably meant to include in his post #10 under "other" has do do with this difference (in part). It's called discounting based on marketability. Even if we were talking about shares and units in a state which treats an LLC more like a corp than a partnership, there is a concept called discounting for such a minority interest. Such interests are worth less for different reasons. Inalienability, lack of managerial control due to being a minority interest and the agreement could limit rights--along with others. Because "members" have voting rights and the one who has (As long as there was "substantial economic effect" to the reason for the special allocation.) the right to a distribution (in the theory of units and the like) does not, the control factor is another reason why the discount is greater in member states as opposed to unit states.

But then, that's just the perspective who sees this every day in estates, trusts and in preparing the tax returns of LLC's in CA.

But, an attorney is a wonderful idea. He will discuss many issues related to the legal and tax aspects of the specific situation, and will help you determine community property rights depending on if the LLC gains more income from the investment made or from the work of the husband.

 

[mistoffolees]

I posted about how mistoffolees was in error about the nomenclature. He has replied what he meant was actually correct even though the jargon he used was not. I also pointed out one real difference between the different concepts as symbolized by the words used to describe them. That's the problem/value of jargon, to those who use terms correctly, the implications of the terms are known. To those who use them incorrectly, you need to give lots of references to show what you mean.

Shares/units are not the same as members. They mean different things. The rights to cash/equity and managerial ability are not the same.

Which is why I blasted Ld for being so wrong.

When I said 'shares' instead of 'units', it's a trivial error with no real meaning to the average person. In CA, they call it 'membership interests' which amounts to the same thing. So 'shares' vs 'units' vs 'membership interests' is a minor semantic difference that doesn't change the content a whit.

Ld insisted that 'members' was the correct concept for the percent of ownership - which is so far off the mark as to be absurd. She then compounded her mistake by insisting that membership interests were not the same as units - which they are in every important sense as shown above.

 

[tranquility]

I believe she was referring to the federal tax concept of how the one who owns something must be the one to report the income from that thing unless the reason is to reflect a substantial economic effect. LdiJ, having prepared a 1065 before, (Which is the normal LLC return as most don't elect to be taxed as a corp.) knows she must enter numbers for beginning and ending partner's share of profit, loss and capital on the K-1. While I don't know if she does CA K-1's or not, if she did, I'm sure she would be aware the same concepts are prefaced by the explanation of "Enter member's percentage (without regard to special allocations) of:"

In any event, we all agree an attorney (maybe a CPA) would be best to describe the OP's rights in this matter. The amount could be large and there will not be a mathematical answer.

 

[mistoffolees]

I believe she was referring to the federal tax concept of how the one who owns something must be the one to report the income from that thing unless the reason is to reflect a substantial economic effect. LdiJ, having prepared a 1065 before, (Which is the normal LLC return as most don't elect to be taxed as a corp.) knows she must enter numbers for beginning and ending partner's share of profit, loss and capital on the K-1. While I don't know if she does CA K-1's or not, if she did, I'm sure she would be aware the same concepts are prefaced by the explanation of "Enter member's percentage (without regard to special allocations) of:"

Yes, that might be the case - IF WE WERE TALKING ABOUT TAXES.

Instead, we were talking about ownership - and Ldij was 100% wrong.

 

[LdiJ]

I believe she was referring to the federal tax concept of how the one who owns something must be the one to report the income from that thing unless the reason is to reflect a substantial economic effect. LdiJ, having prepared a 1065 before, (Which is the normal LLC return as most don't elect to be taxed as a corp.) knows she must enter numbers for beginning and ending partner's share of profit, loss and capital on the K-1. While I don't know if she does CA K-1's or not, if she did, I'm sure she would be aware the same concepts are prefaced by the explanation of "Enter member's percentage (without regard to special allocations) of:"

In any event, we all agree an attorney (maybe a CPA) would be best to describe the OP's rights in this matter. The amount could be large and there will not be a mathematical answer.

I was talking about that to some extent, but I was also talking about the fact that membership interests in an LLC are different than the style of tangible asset that a share would represent.

For example, (and I recognize that there can be variations statewise) a judgement cannot be placed against membership assets in an LLC, the way that it can be placed against shares in a corporation. A lien can only be placed against the income stream from an LLC.

Yes, every member of an LLC has a membership interest. A percentage of the profits, losses and basis that attribute to them by virtue of their membership.

Relevant to this thread, the OP cannot be awarded a "share" of the business. What she can be awarded is an amount of money equivalent to the equity of her ex's or stbx's membership in the LLC.

Therefore in my eyes its not a question of semantics. Shares of stock in a corporation vs membership interests in an LLC are two completely different animals. Even in a state that might have "units" in an LLC, treating it more like a corporation, the units would still be completely different animals than shares in a corporation.

Even shares in a closely held corporation can be different animals than shares that are traded publically and we all know that shares in an S-corp are different animals that shares of a publically traded C-corp, because anyone can own those shares, and there a legal restrictions as to who can own shares in an S-corp.

 

[tranquility]

Um...taxes reflect reality. While there are different rules at different times for different things, part of the difficulty of doing taxes is to put down on paper the economic and legal reality of whatever activity we're talking about. A person cannot "own" something and give away the rights of income to another without there being a reason for it. The law (and taxation) says, "substantial economic effect".

I'm done here beyond saying I agree with what LdiJ has posted on this thread.

 

[mistoffolees]

I was talking about that to some extent, but I was also talking about the fact that membership interests in an LLC are different than the style of tangible asset that a share would represent.

As usual, you're changing your story after you were shown to be wrong.

You said that the ownership was defined by MEMBERS, not Membership Interests. I used 'shares' and 'units' interchangeably - because they are nearly interchangeable and showed you that Membership Interests are the same thing as units.

Then you compounded your error by taking multiple other incorrect positions - all of which I thoroughly rebutted earlier.

I'm done here beyond saying I agree with what LdiJ has posted on this thread.

Well, then you're wrong, too - as I demonstrated by my extensive links above.