Help with multiple owner question

[RenPest]

I'm hoping someone could point me in the right direction.

I am starting a business and will have an area. An associate of mine will have an adjoining area.

We would like to place all the costs of materials/insurance/etc., under one company name.

However, due to our financial positions, he would be doing a lot of work, where I would be doing less, because quite frankly, I don't have to.

This arrangement works out great for both of us, as we have worked together for a few years but need to join up. This way we could help each other out with bigger jobs and cover for each other if needed.

How would one go about setting up an LLC where each person, in sort of a cooperative would contribute to the operating expenses accordingly, say 10% out of what they earn but maintain their own businesses for tax purposes? Think about a main company as an umbrella with two operators working separately like contractors, but contributing to share the name.


This is the biggest struggle right now.

[Business Attorney]

There are several ways to accomplish what you want to do. One of the advantages of the LLC over a corporation is that the income and expenses can be allocated among the members however they agree (but for tax purposes will only be honored if they have "substantial economic effect," which is generally not a problem in most operating LLCs). Many LLCs used by professionals (doctors, lawyers, consultants) have some form of eat-what-you-kill formula that does pretty much what you describe.

While what you want could be done by formula within a single LLC, having all the business in a single LLC does create some risks, exposing each business to all the risks and potential liabilities of the other business. What may work better for you would be to set up individual LLCs for each of your own businesses and either have an umbrella LLC owning both or or simply have the two LLCs enter into a cost-sharing arrangement and forego the third LLC entirely. If there is going to be a common identity, you might also have a third LLC that does not own the individual LLCs but owns the name and provides some central functions on a pass-through basis, somewhat like a franchisor does with its franchises.

Good luck.

[RenPest]

Thank you. That is the best explanation I have heard for what it is I would like to do.