Chapter 7 and income from LLC partnership question - can the trustee shut us down?

[Epic]

I am currently employed by my fathers small LLC business he started a few years ago. I receive regular paychecks, irregardless of a profit or loss that month. His total assets in the business are roughly $20K, mostly cash and one computer and a TV. In studying the Nolo book tonight, I just read that if you “are operating an LLC that you will have to temporarily shut down the business until the trustee can assess the value of the business.” I dug up my fathers last years LLC returns and my father has me listed as a Limited partner with a 25% profit share.

His accountant listed me as receiving 25% profit, 0% loss and 0% capital. His stake is the other side of that 75% profit, 100% loss and 100% capital.

My concern is, this is my only source of income and we cannot shut it down. Can the trustee do this? Will my 25% be considered an asset? If so, what steps should I take to get me off this LLC such as reduce my stake or take me off completely?

I have NEVER claimed any gains or losses from his business. Just my regular paychecks as he has yet to produce a profit since he created the LLC a few years ago.

[despritfreya]

In studying the Nolo book tonight, I just read that if you “are operating an LLC that you will have to temporarily shut down the business until the trustee can assess the value of the business". . . My concern is, this is my only source of income and we cannot shut it down.

If Nolo actually said this, it is wrong. Your father does not have to shut down his business. Even if it was your business you would not have to shut it down.

I dug up my fathers last years LLC returns and my father has me listed as a Limited partner with a 25% profit share. His accountant listed me as receiving 25% profit, 0% loss and 0% capital. His stake is the other side of that 75% profit, 100% loss and 100% capital. . . What steps should I take to get me off this LLC such as reduce my stake or take me off completely?

YOU do absolutely nothing. On the day you file the Trustee steps into your shoes as it relates to the 25% membership interest. What ever rights you have to share in the profits he will have. However, I will bet there is a provision in the Operating Agreement that discusses a limited member's insolvency and I will bet that you can be divested, not of the membership interest, but of any right to share in the profits. Get a copy of the Operating Agreement.

Lastly, the Trustee is not going to keep the 25% interest. He is going to try to sell it. If it has any value, make an offer to buy it.

Discuss these matters with your attorney.

Des.

[Epic]

Des, thank you so much for your reply. You just ended a family feud tonight! It was in Chapter 6, page 233.

I just had him email me a copy of his Articles of Incorporation and Operating Agreement. Both show only his name and address with 100% Interest. My name is nowhere, only in his LLC returns that I get 25% profit once profitable (Schedule K1). He said we are not profitable again this year.

Still searching for an attorney. But when I do find one I want to walk in with as much paperwork completed as possible to help.

[despritfreya]

It was in Chapter 6, page 233. I just had him email me a copy of his Articles of Incorporation and Operating Agreement. Both show only his name and address with 100% Interest. My name is nowhere, only in his LLC returns that I get 25% profit once profitable (Schedule K1).

Be careful. Did dad gift you a 25% membership or is he just gifting you 25% of the profits when there are any? There should be an amendment someplace adding you for 25% and reducing dad to 75% or otherwise explaining this. You need all of the paperwork and facts before you meet with an attny.

Des.