Taxes · Lending

Tax Verification Confirmation

Julie Trell Consultant: Corporate Philanthropy, Enterprising Educator, Creative THNKr, Door Opener, Light Bulb Turner-On

July 19th, 2016

I am leading a regional initiative where our goal is engage radically generous women in creating a new economic model.


We are a Delaware registered LLC

We would like to charge a membership fee of $1100 to 1000 women per community (1000 women in SF/Bay Area, 1000 women in LA, etc). $1000 of that membership will be loaned out to ventures and then paid back over 5 years. 

SO:

- 1000 women contributing $1100 is $1.1m in revenue

- $100K of that $1.1M will be used as working capital for tech and admin costs (assuming this is taxable)

- $1M will be loaned out at low interest to ventures, paid back over a 5 year term and then loaned out again, in perpetuity.

.

We will collect the $1.1M between August and November 2016 and we will not loan it out until 2017. We would like confirmation that the $1M we are loaning out is not taxable.

 

As 20% of the $$ is paid back each year we want to ensure that we don't have to pay tax on that $200K/year/over 5 years, only on the interest we are charging.

Michael Brill Technology startup exec focused on AI-driven products

July 19th, 2016

So you definitely want to find a CPA or tax attorney to help you. Why have you structured this as an LLC vs. a 501(c)3? As an LLC, the $1.1 million in (non-recoverable) membership fees would be recognized immediately as revenue which you *definitely* don't want.

For the loans, no income tax would be due on the repayment of principle, just the interest you charge.

But, again, it doesn't sound like an LLC is the right structure for this entity.