Best method to fund membership interest in parent’s company

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bsnr
Posts: 7
Joined: Wed Mar 07, 2018 12:57 pm

Best method to fund membership interest in parent’s company

Post by bsnr »

My parents own a small company that’s an LLC. I studied and took an exam for licensing for their company but for that to legally work I need to be a member of the LLC.

The company hasn’t been valued yet but is in the ballpark of between $1.5MM to $2MM. I’m interested in a 5% ownership interest if I can figure out how to come up with the cash, which would be $100k at $2MM company valuation.

What is the best method to come up with the required money for this?

Thanks in advance!
Last edited by bsnr on Wed Jul 06, 2022 6:44 am, edited 1 time in total.
mgensler
Posts: 375
Joined: Sun Aug 20, 2017 9:17 pm

Re: Best method to fund membership interest in parent’s company

Post by mgensler »

Banks make loans to purchase company shares. However, you will probably have a difficult time getting a loan. As a minority shareholder you probably have very little rights. The majority owners will pretty much control the company. I would advise not to be a minority shareholder and not to get in business with family. If you want to work and be an employee that's ok but I wouldn't take it any further than that.
123
Posts: 10416
Joined: Fri Oct 12, 2012 3:55 pm

Re: Best method to fund membership interest in parent’s company

Post by 123 »

Can the LLC loan the funds to you (at market interest rates)?
bsnr wrote: Tue Jul 05, 2022 7:27 pm ...for that to legally work I need to be a member of the LLC...
How much ownership in the LLC do you need for it to "legally work"? Is 1% sufficient? Is 0.01% sufficient?

You might prefer to have 5% eventually, but maybe you don't have to boil the ocean to get started.
The closest helping hand is at the end of your own arm.
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