So my business partner and I are forming an LLC in Denver. We agreed on a 50/50 split, but now he wants to contribute used equipment (a couple of trailers and some power tools) instead of putting in his half of the cash. I'm worried about how to value this stuff and whether it's fair. Has anyone dealt with non-cash contributions? How do you even document it without it becoming a mess?
LLC Contributions
My Denver LLC partner wants to contribute equipment instead of cash
Used equipment? Unless it's a vintage guitar, that stuff depreciates faster than my motivation on Mondays. Get an independent appraisal or he might as well contribute Monopoly money.
I've been through this. You need a written valuation and a contribution agreement that spells out what happens if the equipment turns out to be worth less than claimed. Also, check the LLC act—Colorado has specific rules for non-cash contributions. Don't rely on a handshake.
What kind of trailers? If they're enclosed and in decent shape, they might hold value better than you think. But yeah, appraisal is key. Maybe suggest he contributes the equipment AND some cash to balance it out.
Just make sure you're not stuck with a tax bill if the equipment has appreciated. And get a lawyer. This is exactly the kind of thing that ruins partnerships.
Valuation is one thing, but who's responsible for maintenance and insurance? That can eat into profits. Make sure that's in the operating agreement too.
Thanks, all. We're leaning toward getting a professional appraisal and then adjusting his cash contribution accordingly. Still going back and forth on who pays for the appraisal—any thoughts?
Split the appraisal cost 50/50. It's for both your benefits. And if he balks, that's a red flag.
Or just tell him to sell the equipment and contribute cash. Problem solved.