1. THE LLC FREEZE
Roger Royse
Royse Law Firm, PC
1717 Embarcadero Road
Palo Alto, CA 94303
E-mail: rroyse@rroyselaw.com
www.rroyselaw.com
www.rogerroyse.com
Skype: roger.royse

2. The LLC Freeze Structure
Freeze Point
35000000
30000000
25000000
20000000
15000000
No Freeze
Freeze
10000000
5000000
0

3. Alternative 1: No LLC Freeze Alternative 2: LLC Freeze
Entrepreneur Entrepreneur
C Corporation C Corporation
(DE) (DE)
Limited Liability
Company
Entrepreneur’s wholly owned C corporation develops an asset.
Alternative 1: The asset keeps growing in the C corporation.
Alternative 2: The asset is dropped into an LLC of which the entrepreneur is also a member.

4. Alternative 1: No LLC Freeze
Entrepreneur
Gross Value $5 M
Inherent Gain $5 M
Basis $0
C Corporation
(DE)
The asset remains in the C corporation.

5. Alternative 1: No LLC Freeze
Entrepreneur
Gross Value $50 M
Inherent Gain $50 M
Basis $0
C Corporation
(DE)
The asset continues to grow within the C corporation and is now worth $50 million.

6. Alternative 1: The Sale
Entrepreneur
Amount Realized $50 M
- Basis $0
Taxable Gain $50 M
$50 M
Purchaser C Corporation
(DE)
The asset is sold to an unrelated party for cash, resulting in a $50 million taxable gain.

7. Alternative 1: The Taxes
Entrepreneur IRS
($11.4 M)
$32.5 M
C Corporation ($17.5 M)
(DE)
$50 M
Gain $50 million
35% Corporate tax ($17.5 million)
35% Individual Tax on remainder of C ($11.4 million)
Corp.’s gain
Amount remaining after all taxes $21.1 million
Entrepreneur must pay two levels of tax on the taxable gain because the asset was held
through the C corporation.

8. Alternative 2: The LLC Freeze
Entrepreneur
Gross Value $5 M
Inherent Gain $5 M
Basis $0
C Corporation
The LLC Agreement: (DE)
Status Capital Profit/Loss
Account Allocation
C Corp. Investor $5 M 1%
Limited Liability
Entrepreneur Service $0 99% Company
Provider
While still small, the asset is dropped into an LLC. The C corp. takes a capital account equal
to the asset’s value at contribution and takes a 1% profit/loss allocation.

9. Alternative 2: The LLC Freeze
Entrepreneur
Gross Value $50 M
Inherent Gain $50 M
Basis $0
C Corporation
(DE)
Limited Liability
Company
The asset continues to grow within the LLC and is now worth $50 million.

10. Alternative 2: The Sale
Entrepreneur
Amount Realized $50 M
- Basis $0
Taxable Gain $50 M
C Corporation
(DE)
$50 M
Purchaser Limited Liability
Company
The asset is sold to an unrelated party for cash, resulting in a $50 million taxable gain.

11. Alternative 2: The Taxes
IRS Entrepreneur
($1.1 M)
($102,375) $3.25 M $44.5 M
($15.59 M) $292,500
($1.75 M)
($157,500)
C Corporation
Gain $50 million (DE)
35% Corporate tax (on pre-contribution value) ($1.75 million)
35% Corporate tax (on C Corp.’s 1% of the $45 ($157,500)
million post-contribution asset growth
$5 M
$450k Limited Liability
35% Individual Tax on remainder of C Corp.’s ($1.1 million)
Company
pre-contribution gain (when realized)
35% individual tax on remainder of C Corp.’s 1% ($102,375) $50 M
of post-contribution growth (when realized)
35% individual tax on entrepreneur’s 99% of ($15.59 million)
post-contribution asset growth
Amount remaining after all taxes $31.3 million
Using an LLC Freeze, 99% of post-contribution appreciation is subject to just one level of tax.

12. Summary
Corporate Level Tax
20000000
18000000
16000000
14000000
12000000
10000000
No Freeze
8000000 Freeze
6000000
4000000
2000000
0
An LLC Freeze halts nearly all corporate level tax without disturbing asset development.