Partner agreements and LLC q's...

General Real Estate Investing
1

Hey folks, first time poster here. Couple of questions on LLC’s and co-owners.

Situation: Looking at forming an LLC for REI (primarily flipping) with 3 other (couples) partners. We like the idea of protecting our assets.

Q1, We agree in principle on a few things like every voting member can veto a deal. A majority rules on cosmetic/design decisions, etc. Do we need a lawyer to draw up a partnership agreement that spells all of this out?

Q2, Will most banks or lenders allow multiple parties to guarantee the loans prior to the LLC establishing credit?

Q3, Last one for now…How do we get our money into the LLC? Do we simply agree to xfer in a set amount or do we have to loan the LLC our money?

Thanks everyone! Hope I get a good response here as I have searched high and low for a good discussion group on these topics…

Aaron

2

beavism,

There are eight ways to take title, six of them allow for co-ownership:

  1. Community Property;
  2. Joint tenancy;
  3. Tenancy in Common;
  4. Tenancy in Partnership;
  5. Title Holding Trust
  6. Community Property Right of Survivorship.

For a independent analysis, here is an excellent report from Chicago Title Company that should answer many questions.

http://www.chicagotitle.com//pdfs/8ways.pdf

I would use a land trust and assign the partners a beneficiary interest proportionate to their contributions.

Da Wiz

3

you do not need a lawyer to set-up the agreement; however, if you or someone in the group is not experienced at setting these up, it might be a good idea. The reason being is the toughest part of the agreement is to account for situations that you might not foresee right now (particularly unpleasant ones)

second, for the most part, you will always guaranteeing the loan even if you use an LLC to hold title. yes, the LLC can establish it own credit, but just doing a few flips is not really going to get it done.

4

If you find a bank that will lend to the LLC with a personal guarantee, then I’m sure having multiple guarantors would NOT be a problem! More security for them.

Do not comingle finances. Don’t pay for personal expenses thru the LLC. Don’t personally pay LLC expenses personally. Either fund the LLC upfront, or make a personal loan to the LLC. Make it legal with promissory notes, the whole deal. Have the LLC make regular payments with interest. Then the LLC has funds to operate/invest as needed.

When working with partners, even (especially?) friends, keep everything in writing.