Entity or no entity

General Real Estate Investing
1

Hello everyone,

I’m in need of some advice. My bus. partner and I are starting out as wholesalers and have not registered a LLC/Scorp or any other business entity. I have been studying and researching the different entities and feel/think that an LLC/Scorp would be our best bet. I realize that we need to see an attorney to really tell us and confirm what would be the best entity for our partnership but unfortuately as newcomers to the business we have limited funds for consulation and creating the entity.

My concern is this, i’ve been reading different topics on this forum and have notice that there are a few of you who feel that an entity is not necessary and/or worthless if its not done correctly. (I somewhat agree with that) Do we have to create an entity before we get our first deal? If not my other concern is since we are doing this together how can i/we deduct the expenses that we are accruing for the startup of the business?

I understand that there are some people that are sole proprietors with no entity and use a Schedule C. Okay this make sense to me. With this information how can i mirror this scenario but with two people with no entity?

Thanks in advance

2

The two of you are a partnership and would be wise to formalize the arrangement. I would suggest an LLC since some states provide limited liability to individuals for the actions of others taken in the name of the LLC.

3

“handshake” partnerships are easy, but can quickly go bad if one partner doesn’t do his part, gets sick, gets divorced, gets deployed to Iraq, whatever.

I’ve seen all these. None of them ended well.

Always have a written partnership agreement that documents who will do what, fund what, borrow what, how the business will be terminated, who decides what, who spends what, provisions for division upon death, divorce, everything.

Always, and I do mean always, have an exit strategy.

Partnerships are a great way to lose friends.