Limited Liability Company Membership Interest in Florida

Limited Liability Company Membership Interest in Florida

Limited Liability Company Membership Interests in Florida

A Florida limited liability company’s membership interests are a lot like a corporation’s stock. Both measure an individual or entity’s stake in the business, usually based on their initial contributions. Members can make contributions in money, services (also known as sweat equity), property, or even a promissory note. However, keep in mind that cash-derived membership interests tend to hold up better in the Florida court system. 

Neither you nor any of your fellow members should put off making your contributions. Failure to follow through with payment can open you up to liability problems in the future. The same holds true if the contributed capital goes towards profits or salary. Membership interest obtained through avenues other than straight currency can come with certain requirements, too. Don’t hesitate to reach out to a business attorney for assistance.

Trading Services or Property for Company Stake

When a Member trades services for a stake in the company, that Member must pay income tax on the value of the interest at the time that the services are exchanged. If the exchange is only being made with a promise of the share of future profits, then the Member doesn’t have to pay that tax until all profits have been received. 

Appreciated property – or assets that have a higher market value than their original cost – have similar taxes. The appreciated property’s tax basis applies to the membership interest. Members pay appreciation taxes when selling their interests. Companies selling appreciated property pay taxes on the difference between the sale price and the original contribution. 

Learn more about measuring membership interest here.

When launching a business, it’s crucial that you have a solid foundation that will encourage growth. As a firm of entrepreneurs ourselves, we know how to start businesses off the right way. Hiring an attorney reduces the chance that your company will run into trouble down the line and equips your business with the information and documents that you need for success. For assistance with starting your business or growing the one that you already have, visit our service page or contact us by calling (727) 279-5037.

Image: People Wearing Pair of Multicolored Socks by Snapwire on Pexels.

About Us

FL Patel Law PLLC is a boutique business law firm dedicated to entrepreneurs and companies.

Have a Question?