Can a LLC purchase assets from another LLC and not be taxed on the transaction?
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Can a LLC purchase assets from another LLC and not be taxed on the transaction?
I am buying a 1/3 share of a LLC. Previously the LLC was single member owned. The owner has debts that I do not want to be party to. Is there a way for us to create a newly formed LLC with both of us a members, buy the assets from the previous LLC and leave the debt that the is owed in the LLC that he fully controls and manages, without being taxed on this transaction? If not, is there a way for the newly formed LLC to buy in full the single member LLC( this would be for other reasons)? What would these transactions entail?
Asked on January 28, 2012 under Business Law, Ohio
Answers:
Glenn M. Lyon, Esq. / MacGregor Lyon, LLC.
Answered 12 years ago | Contributor
Any assets transferred to the new LLC will affect its tax situation. If they are contributed (i.e. given and not sold), then the value will be your tax basis in the LLC. If they are sold, taxes generally applicable to such transactions will apply. (Keep in mind that members are not generally liable for the debts and obligations of the LLC.)
Regarding your second question, it is possible, although most "buying of businesses" entail buying the assets of the company and not the actual ownership of the company to avoid taking on the company's debts.
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