Contributions and LLC members

General Real Estate Investing
1

Hello Good day to all reading this email, my inquiry is in regards to membership contribution to the LLC. If my business partner is providing the funds necessary to execute an investment, and I am providing the knowledgde but not capital

  1. Can my knowledge of real estate investing be considered a legitimate “contribution” to the LLC?

or

  1. Will I have to make a contribution that is more tangible such as
    a) a promise to manage the property?
    b) a promise that for our next investment endeavor I will provide or contribute half the costs associated with aquiring of next property?

In the scenario, I am a partner that is contributing knowlegde and information but little or no money.

Any suggestions on how I can contribute a legitimate “contribution” without tangible or liquid assets will be most helpful.
Thanks to all reading this post

2

From my investigations into this in Washington state, the percent ownership is an arbitrary number agreed upon by those drawing up the articles of incorporation. No money investment is even required. The contribution amounts and requirements just need to be stipulated very clearly for each partner.

This is not legal advice, but what I read in Washington State’s website regarding starting an LLC.

3

i too am not a lawyer, but i think your assessment is correct.

4

Thanks alot for the responses niravmd and tshepherd, continue sucess in you wealth creation endeavors.

5

Onnpage 3/8 of “Form your own LLC” they discuss contributions. Service or Cash. Your operating agreement must spell out the contribution/service and % of funds dispursed. You can do what ever you agree to. Your service will have a TAX value. You may have to declare this as income. Check with a tax attorney.

WaltB

6

thanks for the feedback WaltB, I will definitely investigate your suggestion further. Have a excellent day.

7

Agreed -
For an LLC you’ll have an operating agreement. This is similar to a partnership agreement (in partnerships). This agreement is vitally important for many reasons. It covers each member and the entity for a variety of situations. One aspect is to spell out ownership percentages. The degree of ownership does not have to come in the form of money. What you mentioned in your post is perfectly fine. For example, if your parner puts up 90% of the funds and you put in 10% plus you do all the leg work and both agree to go 50/50, then put that in your operating agreement.

In addition, if you do not have an operating agreement, I believe the rules will default to the state laws governing your LLC. For example, in many states…the defaul law says that each partner is entitled a percentage equivalent with the amount of funds put into the company. This will basically mean your partner gets 90% of the profits and you get only 10%.

I am not a lawyer however this is the info I found during my research in forming an LLC for something outside of investing. Your best bet is to ask a qualified small business or corporate attorney in your area. Best of luck.

8

Thanks for the feedback ForeverInvestor and I appreciate you taking the time out of your day to respond. Continued success in all your investment pursuits.

9

Anytime. I hope I was able to shed some light on your questions.

10

Hi guys,

Are there any examples of operating agreements out there? I need a generic O.A. to document my company, but I’m not crazy about paying an guy with a template on his computer $400 for 5 minutes worth of work…

Thanks in advance,

-SLip

11

Slip -
Check google for “Operating Agreement Examples”. There are several legal sites that give out common O.E.'s. I would take the time to research this so that you include all the necessary information to cover all your bases. Good luck.

12

Thanks F.I. I appreciate your help.

Googled this before, but left out the “examples” part… DUH!

Just goes to show, it’s not what you know, it’s how you go about finding out!

-Slip

13

No problem. Glad I could help.

Here’s a site:
http://www.legaldocs.com/htsgif.d/xllc-op-ag.mv

www.legaldocs.com is a decent place to check out for different things. Good luck!

14

Hi,

For everyone:

I have found books and forms from Nolo Publishing (Nolo.com) to be reasonably priced, very understandable for the novice, and very complete. They always have links to offices in your state for more information.

I would recommend reading books from them on your area of interest to self-educate. Their motto is “putting the law into plain English”. :wink: :wink:

It will also save you attorney fees.

I was able to draft a religious non-profit using Nolo guidelines. I took it to an attorney/CPA for review prior to submission to my state. He advised a couple of changes.

Everything came back from the state in record time. I was only asked for clarification of one item in the by-laws. My consulting attorney/CPA even called to congratulate me on my fine work (thanks to Nolo).

They do have good material for landlords, LLC’s and other Corps. Check them out! :wink: