This LLC needs advice

General Real Estate Investing
1

Good Morning All,
I didn’t think I would ever have this problem…famous last words!!!
I formed an LLC with my daughter. She and I have always been able to work together on business projects in the past. What has changed!?
We purchased a house to rehab. We got the loan and started work on the house. She said that she and her fiance would do most of the labor and I would be the one that did the paperwork, loans, banking and making runs for supplies. I would teach her how to do the business and one day she would go out on her own. We are half way through the project and now there is a problem.
Her fiance has worked hard and steady all summer, but, he has started to object to everything I want to do. He now demands to see the loan papers, tells me I can’t use a second mortgage and wants to make all the decesions on the project. I told him, I didn’t need his permission and that My daughter and I were the owners and I didn’t need his permission. Yes, I was angry!! Bottom line, my daughter says he is her partner and has as much rights as we do. How do I get her off the LLC? She refuses to sell and won’t sell the house either without it being full market price. Was I wrong? What do I need to do?
Lind

2

sorry. mixing business with family just doesn’t work very well. next time get everything in writing (management agreement) before you begin.

anyway. some options:

  1. buy her out. give her a note payable due when the property is sold, finish the project, sell it, pay her off, get out. note that reducing the LLC to one member may have tax consequences depending on how it’s being taxed.
  2. sit down, work out a WRITTEN plan of how to finish the project, including who is going to get paid what and when. reduce it to WRITING, everyone signs it, everyone’s on board. if he doesn’t want a 2nd, then he is free to suggest EXACTLY how the rest of the rehab is going to be funded. if he wants to write a check, that’s fine with you.
  3. they can always buy you out. name your price. take a 2nd mortage on the property if you have to, to pay you what you think you’re owed. get out. let them figure it out. personally, I’d take this route. it’s just easier for me.

good luck.