This situation is quite common in forming a new business where some members contribute cash, others property, and others Intellectual Property. The source code here is valuable Intellectual Property that can be contributed in exchange for the membership interest in the LLC exactly as you state. However, the other members are assuming that the IP is worth the fair value of the membership interest he gets back. As long as the board of directors certifies that the LLC has received adequate consideration for the membership interest, then there are no problems internally so long as you all agree on a price.
The main problem will come with the IRS if you value the IP too low. Take the following example:
Member...Contributes....Basis......FMV........Stock
A.............Cash...............30.........30.........30
B.............Property.........10.........30.........30
C.............IP....................0..........40.........40
In the above scenario, the founders take their membership interest with an initial capital account equal to their basis in the property. Self-created IP has a basis of zero because he did not pay anything for it. He'll pay for it in the end when he sells his membership interest.
The problem here is if the IP is value too low, the IRS can come back and revalue the IP saying that the FMV should have been 60 instead of 40. As a result, income can be attributed to the other founders and additional tax may have to be paid. However, there is a catch all that says if you didn't have tax avoidance as your principal motive generally the IRS will not do income shifting as above.
Note: The above information is not legal advice and does not create an attorney-client relationship.
