My domestic partner and I are forming a company, an LLC partnership, to open a small bar. We need to borrow a large sum of money in addition to what we're putting in out of pocket. I will be putting up all the collateral in the form of my home equity. My domestic partner has terrible, TERRIBLE, TERRRRRRRIBLE credit (student loans mismanaged before I smacked some sense into him), and I have excellent credit. Since the business loan interest rate will be based on the lower credit amount of any partners 20% or over, my partner has agreed to be a 15% owner with me as an 85% owner, so we can get a better loan rate. This also reflects my higher risk in putting up all the collateral, and the fact that I will be putting in more work in the beginning while he manages selling off the assets of the other business we own together.
Here's where I run into problems... I would like to be a limited partner. I don't want someone to be able to sue the bar and get my house (it's a historic landmark that I've put a lot of work and love into, and I can't imagine being anywhere else). Maybe you're thinking "why are you putting it up as collateral?" I'm not worried about paying off the loan as much as I am of being sued by a customer. Since I'll be the manager during the first year, I guess I can't be a limited partner for that year, but after that, when my partner takes over as manager w/ hourly pay, is there a way for me to convert from a general partner to a limited partner, and how difficult is that going to be?
And to make things even more confusing: how would a subchapter-S election for taxation affect all of this? (I don't want to end up paying self-employment taxes on every cent we make). ANY ADVICE GREATLY APPRECIATED. Unless it's "don't open a bar." Just looking for advice on re-organizing the partnership, which will be more complicated than the general partnership of our current business.
Here's where I run into problems... I would like to be a limited partner. I don't want someone to be able to sue the bar and get my house (it's a historic landmark that I've put a lot of work and love into, and I can't imagine being anywhere else). Maybe you're thinking "why are you putting it up as collateral?" I'm not worried about paying off the loan as much as I am of being sued by a customer. Since I'll be the manager during the first year, I guess I can't be a limited partner for that year, but after that, when my partner takes over as manager w/ hourly pay, is there a way for me to convert from a general partner to a limited partner, and how difficult is that going to be?
And to make things even more confusing: how would a subchapter-S election for taxation affect all of this? (I don't want to end up paying self-employment taxes on every cent we make). ANY ADVICE GREATLY APPRECIATED. Unless it's "don't open a bar." Just looking for advice on re-organizing the partnership, which will be more complicated than the general partnership of our current business.
via Small-Business-Forum.net http://ift.tt/1eIoGEX
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