Hello everyone,
I am looking to form some sort of “agreement” between my brother law and myself. We both live in Nashville and are looking to purchase a few properties for rent or to flip. I’m just trying to figure out the best structure (ie Trust, Corporation, etc?). Thanks for any help.
Nate
Nashville
This is TX law, but maybe it’ll get you started.
You don’t have to “file” anything to have a partnership. Handshake partnerships are created all the time. However, if you want to be more formal, you can find a boilerplate partnership agreement online somewhere and set up an entity with the TN Secretary of State’s office.
However, I’d seriously recommend setting up an LLC for the greater asset protection it provides. Partners are personally, jointly and severally liable for partnership liabilities. Partnership buys a house, stupid kid next door steps on a nail in the yard, partnership is sued, Nate is personally liable. get it?
You could set up a limited partnership, but that usually means having a corp to be the general partner and some other hassles. LLC is the way to go.
let me know if you need help.
Mark Wagner, CPA
Mark, I see your designation and I would guess that you are normally paid for this type of information, so I just want to say thanks and that I greatly appreciate you taking the time to spread your knowledge.
Here is some more detail on what I’m looking to do: Basically, I will form my own “family” entity (which I don’t know what I should form in that situation either) and my brother in law is going to form his own. If we buy a property, we would form a LLC as you mentioned for that individual deal. Would a LLP be a better option? I only ask because I have heard of people using those for similar situations as mentioned above.
Thanks again for your comments
Nate
If you have an LLC, and your brother has an LLC, then the two could have a partnership on the deal with THE LLC’s as the partners (NOT you personally) and not sacrifice your asset protection. In this case, I’d probably not recommend a “handshake” partnership, as it would be better to memorialize that it’s the LLCs who are the partners.
Or, for under a grand you could establish a third LLC for the deal.
Of course, you’re looking at a more complex (read: costly) set of books and tax returns for all this.
You could take an interim step by establishing the LLC for this deal with B-I-L, and do your family planning at a later time. simple, clean, gets the job done.
Mark Wagner, CPA