Profit Interest in an LLC Rod Mauszycki

Profit Interest in an LLC

Rod Mauszycki

WEALTH ADVISORY | OUTSOURCING | AUDIT, TAX, AND CONSULTING 4,500+ people CLA atCLA a Glance WEALTH ADVISORY ADVISORY WEALTH | OUTSOURCING

| AUDIT,CONSULTING AND TAX,

locations 100+

Producer |

AUDIT,CONSULTING AND TAX, Cooperative

CLA is one of the largest of the one isCLA organizations the in service providersservice to agribusiness and cooperative country

3 ©2015 CliftonLarsonAllen LLP • • • Rod Mauszycki WEALTH ADVISORY ADVISORY WEALTH MN Minneapolis, Agribusiness Principal, in: degrees Holds – – – Chemical EngineeringChemical Business Taxation Law | OUTSOURCING

| AUDIT,CONSULTING AND TAX,

4 ©2015 CliftonLarsonAllen LLP Great way totransfer “sweatvia equity” Profit Interest Profit WEALTH ADVISORY ADVISORY WEALTH partnership Son/daughter getspercentage profits of in Over time, capital accountincreases | OUTSOURCING event Acquiring profita interest isnot ataxable

| AUDIT,CONSULTING AND TAX,

| AUDIT,CONSULTING AND TAX, Can’t be for tax avoidance! tax for be Can’t be a transaction. sham economic substance. economic

Must have Must Must not not Must !

6 ©2015 CliftonLarsonAllen LLP • Interest Profit • WEALTH ADVISORY ADVISORY WEALTH interest. interest. profit a 20% with each provides he company, hisof key are Eric parts and Nathan over. As take to Eric and Nathan wants career and his down winding is Frank father. Eric’s and Nathan is Frank Example: Assumptions: – – – Tax distributions only (32% of profits) (32%only of distributions Tax Profits: $130,000/year, year increase 3% per $1,200,000 business: of Value | OUTSOURCING

| AUDIT,CONSULTING AND TAX,

WEALTH ADVISORY ADVISORY WEALTH

$1,200,000 $1,200,000 $1,200,000 $1,200,000 $1,200,000 $1,200,000 $1,200,000 $1,200,000 $1,200,000 $1,200,000 $1,200,000 $1,200,000 Frank | OUTSOURCING

| AUDIT,CONSULTING AND TAX,

$226,442 Eric $19,899 $19,319 $18,757 $18,210 $17,680 $23,760 $23,068 $22,396 $21,744 $20,496 $21,111

Nathan $226,442 $23,760 $23,068 $22,396 $21,744 $20,496 $19,899 $19,319 $18,757 $18,210 $17,680 $21,111

Frank's Frank's Interest Capital Capital 72.60% 74.75% 76.96% 79.24% 81.58% 83.99% 86.47% 89.03% 91.65% 94.36% 97.14%

Interest Eric's Eric's Capital Capital 13.70% 12.63% 10.38% 11.52% 9.21% 8.00% 6.76% 5.49% 4.17% 2.82% 1.43%

Nathan's Nathan's Interest Capital Capital 13.70% 12.63% 10.38% 11.52% 9.21% 8.00% 6.76% 5.49% 4.17% 2.82% 1.43%

| AUDIT,CONSULTING AND TAX, Lower’s Frank’s

estate

business tobusiness sons Within 10 years, 10 Within Frank transfers over of 25% 9 ©2015 CliftonLarsonAllen LLP • Interest Profit • WEALTH ADVISORY ADVISORY WEALTH used to buy out Frank at a later date. a at later date. Frank out buyto used be could business the in kept amount the In theory, years. of perioda over ownership transfer to way Great – essentially a saving account. is paid already taxon,itthisEric moneyAs Nathanand is |

OUTSOURCING

| AUDIT,CONSULTING AND TAX,

Rod Mauszycki, Principal [email protected] 612-397-3076

Thank You CLAconnect.com

linkedin.com/company/ facebook.com/ @CLAagribusiness cliftonlarsonallen cliftonlarsonallen