LLC Startup question

[iamryan]

What is the name of your state? Nevada


Hi,

Myself and 4 others want to start up a small business and are thinking about starting out as a LLC. The breakdown of ownership will be like this

Ryan - 27%
Aaron - 27%
Natalie - 18%
Patrick - 18%
David - 10%

The catch here is this, David is the only one who is investing any $$$. He has agreed that for $4000, 10% of the company is all he wants. The rest of us are going to run the company. I have been reading, and it seems that we each need to make a capital contribution equal to our share of the business. Is there any way around this? I mean, for each of us to contribute it would reach around $50,000. That is way overkill to start. Is there any way to obtain membership ownership in both capital and profits and loses without investing any $$$?

Thanks!

 

[hexeliebe]

Is there any way to obtain membership ownership in both capital and profits and loses without investing any $$$?

Yes, it's called 'sweat equity' and is defined as other than monetary investment. Such things could be time, talent, doing the books, running the company or anything else you and the others agree on.

Property, office space, office furniture, computers or just about anything could be considered as your initial investment. There is no statutory restriction except those put on the investment by the partners themselves.

 

[iamryan]

Right, but "sweat equity" still has to equal your percentage of capital interest. Lets say, i agree to to work without pay. I would have to work without pay up to around $6500. And be taxed on top of it. The thing is, we don't need anymore money, equipment or anything. Basically we just want to divide it up how we have it structured and use the $5000 to start.