What are the tax implications for a silent partner of an LLC? By that, I mean someone who has been added as a member to an LLC for the purpose of borrowing their credit scores, but one that does not have any expenses nor receives any income from the LLC.
Do they need to file anything come tax time?
How is the LLC taxed? Most likely, they will need a K-1 and report the profit/loss on their individual return.
What does the operating agreement say? If you used the cookie cutter version, they get an equal cut of the profits in addition to voting rights and the right to view the books and make decisions. They are only silent if the operating agreement calls them silent. You can also divvy up the taxes however you want, but it is to be in the OA.
Yeah, I did use a cookie-cutter OA from legaldepot.com, and its been so long since I looked at it that I don’t even remember how I originally set things up (probably a good time to dust it off and review it)
Can’t I just add an ammendment reassigning all the tax liability away from the silent partner (as long as all LLC members agree and sign the ammendment of course)?
You can, but do you feel qualified to draft the language. An operating agreement needs to be updated each year to reflect changes in the law.
Can't I just add an ammendment reassigning all the tax liability away from the silent partner
Uhm…you’re either a partner or you’re not. I’m not aware of any way to be a partner for the parts you want to be a partner of, and not be a partner for the other parts.
You’re in for your % share, both good and bad.
Maybe I don’t understand LLC taxation like I thought I did…
You mean you just want a co-signer for the loan? No need to be listed on the LLC.
I put all my financing in the name of my LLC, so I assumed it wouldn’t work to just have another inidividual sign on as a cosigner, which is why we added them as a member of the LLC, but maybe I’m wrong…
That’s why you need an attorney to set up things in a way that is not one-size-fits-all. You have special needs and the agreement could have been set up to achieve what you want.
I have my latest property and financing and all bills in the LLC’s name, but I used a co-signer at the last minute who is not on the LLC. PNC didnt care one bit.