My investment partner and I are going to set our LLC up here in the next week. Any suggestions on how to set it up? We were planning on just filing the papers with the state.
I’ve read information here before on this topic, everyone seems to have their own opinions though.
Any input is appreciated.
Thanks
Who is going to draft the operating agreement? That is the real work.
I was going to look over various op. agreements online, and modify and/or model ours after those.
If it is just a one person LLC do you need an operating agreement?
The benefit of an LLC is the operating agreement. An LLC without a properly drafted operating agreement is just a waste of time and money. Think of it as a gun with blanks. Every major negative court case involving an LLC has been directly tied to a poorly drafted operating agreement. You aren’t saving any money going in the direction you are now. The LLC will fail if you ever actually need it.
Here’s a situation where you should be particularly worried. There are actual cases where LLC interests were given to a creditor. The creditors were not limited to charging orders and they had a say in how the business was run. In one situation, the other partners agreed to letting the creditor become a member. In another, the creditor was made a member contrary to the wishes of the other partners.
BLL thanks for the useful information. How much would we be looking at for an RE lawyer to draft this up, in addition to the filing fees. And how long does something like this take.
Thanks again.
The best move is to have your local attorney and CPA retain one of the national planners. If money is tight, you can use one of the cheapie forms until you get to the point where you can afford it. In meantime, put a homestead on your personal residence, be mindful of how you hold title to personal property, and carry plenty of insurance. That will provide inexpensive protection that will cover most situations. Also, educate yourself on the limitations of LLCs.
Question for BLL:
What is a National Planner?
Why homestead if there is no lawsuit?
Thanks,
FurnishedOwner
A national planner is one of the few people (~ a dozen) in the United States who actually has more than a basic understanding of the issues concerning asset protection, or wealth preservation as it’s now called. They do not speak at RE conventions and seminars and don’t have mentoring programs. Some testify before Congress and speak at conferences where attorneys learn about these issues. They are the people the gurus quote and just about all of them are practicing attorneys who attack and defend plans in court. They key difference between them and gurus is that their plans are subtle and don’t look like asset protection. Guru plans are usually convoluted and in your face, a recipe for disaster.
A good rule of thumb when evaluating a plan is that if you don’t understand why it is set up the way is set up, you can bet the judge and jury won’t either and they will just assume you are up to no good. Good asset protection doesn’t look like asset protection.
In some states, homesteads need to be filed before there is a claim. By claim, I mean the incident that caused the injury. That is the time when the clock for fraudulent transfers start.
Thanks for the answers, BLL.
Just another thought–can a married couple homestead 2 residences if they live in 2 different places?
Everytime you buy a new home you can homestead it, or is it a once in a lifetime event?
FurnishedOwner
It depends on your state. In mine, it must be the primary residence and changes each time the residence changes. However, a homestead can only apply to one property at a time.
I don’t see any problem with 1 homestead for each spouse if each property qualifies as a personal residence. You will need to confirm with a knowledgeable attorney for your state.