Posted by Rich-CA on January 21, 2008 at 08:59:29:
If you feel you must join a partnership, the shares among owners/members really should be pro-rated based on the contribution. Managers, unless it says otherwise in the Operating Agreement, would all be equal. Your solution of 2 additional managers would make sense in terms of splitting the control equally.
You will want to make sure that the Operating Agreement spells out how and how much you will pay to get out of the partnership should you decide to do so. You will also want to make sure that liability insurance is in place and covers you individually as well as collectively. You will need to make sure that debt is allocated equally to the members and that you are not responsible for the whole debt should your partners file bankruptcy or are otherwise unable to pay.
The biggest issue with partnerships is (1) liability caused by one partner falls on all the others and (2) debt is the responsibility of each partner for the TOTAL amount and not a prorated amount. You only need one partner who makes some risky or illegal commitments while accumulating a lot of debt to ruin your personal credit.
Posted by Natalie on January 18, 2008 at 13:04:15:
We are in contract to purchase a property and thinking to have it in LLC, after we close. The two partners that we are purchasing with already have an LLC set up and can modify it to include us (husband and wife).
Right now two of them are general managers of that LLC and partners at work/investments. We are interested in joining as generals managers, as we are active investors.
This would be a developement project, we are going to be building two houses. So would need to agree on things like Architect, Engineers, which builder to use, possibly using a combination of builder and our own contractors, etc…
In their current LLC, under Powers of Managers section it states the following:
“In the absence of any agreement, no Manager may exercise any rights and powers without the consent of a majority (in number) of the Managers. Furthermore, any provision in this Agreement requiring the consent of the Managers means the consent of a majority (in number) of the Managers unless otherwise expressly stated.”
My question is what is the best way for us to set it up so that we have equal power with them in terms of decision making and yet resolve a disagreemnt if we have one. If we join as two other managers, then it would be 50-50. What is the best way to go? This is just preliminary research of course we would talk to an attorney as well, I am just looking for some ideas.
Posted by John Merchant on January 22, 2008 at 11:05:25:
I’d agree partially with Rich but another huge issue that gets lawyers involved is how to leave an LLC (or non-LLC p’ship) without a huge battle.
The time and place to prevent and avoid this is the formation and drafting of the operating agreement when the LLC is established or when another partner/share holder comes into the LLC and the op. agrmt. is amended to include the newcomers.
Have your lawyer look at and insert language into the Op.Agrmt. as to what will occur and your rights if and when you or the other owners decide to leave the LLC.