PRIOR TO DOING FIRST DEAL - - Posted by jIM

Real Estate Investing
1

Posted by JIM on November 06, 2005 at 04:15:57:

I didn’t know, that’s why I asked. I’m glad I did now, maybe that’s what we’ll do.

Thanks!

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PRIOR TO DOING FIRST DEAL - - Posted by jIM

Posted by jIM on November 05, 2005 at 10:51:26:

(I’m posting this to other forums as well)

A friend and I are starting this together, and we both agree that we shouldn’t use our own names to do business. I’ve heard that partnerships aren’t the best way to go either, as you can be held personally responsible for your partner’s legal debts and issues. So would forming an LLC be the best way to go, and how do you divide the LLC between two people? How about doing it ourselves online or better to be safe and have an attorney do it for us?

Thanks -

Jimmy D

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Re: PRIOR TO DOING FIRST DEAL - - Posted by John Corey

Posted by John Corey on November 05, 2005 at 11:44:38:

Jim,

I do not recommend you do it online. Nothing wrong with the tools online. What is missing is the education you will need so that you can fit what you select to your situation. Or do it online and be prepared to correct things or start again when you realize that maybe the tax treatment or other aspects are not really set up correctly.

More important is the fact that you will still not be able to finance a property in an LLC unless you are using a private lender. Conventional lenders will only do the deal if the property is in the name of someone with an acceptable credit score.

There is a lot to learn. If you operate ethically and are up front with lenders, etc you can correct mistakes as you go along.

I almost always recommend that you find a RE focused attorney and you spend some money with that person to get educated. Best still is to read up on the subject (legal form here, William Bronchick’s books) and then speak with the attorney so that you can cover things that are specific to your situation.

Liability protection on the cheap can some of the time turn out to be no protection at all. If that does not bother you then I am not sure that you should even worry about liability protection.

BTW - One benefit of using an attorney is you are picking up some liability protection if they get it wrong. This is a bit weak as a benefit. It is still stronger than what you get from a website. The attorney has skin in the game when they work on your paperwork.

John Corey
Chelsea Private Equity, LLC

PS. If you pick an attorney who is not focused on RE you can get some pretty bad advice. Get recommendations from other RE investors in your state.

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Re: PRIOR TO DOING FIRST DEAL - - Posted by DP (ON)

Posted by DP (ON) on November 05, 2005 at 11:43:06:

I think you should do a deal first. What’s the point of paying to set up an LLC before you even know if you can complete a deal?

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Re: PRIOR TO DOING FIRST DEAL - - Posted by JIM

Posted by JIM on November 06, 2005 at 04:20:02:

Thanks, John. After I posted this I started wondering about using a RE attorney specifically, too. It seems to make sense to me. I know many people have done the LLC online but some of the points you raise about running into potential problems came to mind.

This is why I asked - I knew some people that read this site regularly has probably been where my partner and I are right now.

Thanks!