Creating LLC for fix and flips

[Matt Petrovski]

Does anybody have any recommendations/insight on creating my operating agreement and articles of organization? This will be for my father and I. So I'm curious if this can be done online or would it be in our best interest to schedule with a lawyer to draft it?

[Jason Malabute]

@Matt Petrovski congrats on getting started with your dad. A couple thoughts from the tax side that the lenders above didn't touch on.

For fix and flips specifically, the IRS treats your profits as ordinary income (dealer status), not capital gains. That means you're looking at self-employment tax on top of your regular income tax, which can add up fast. A multi-member LLC with your father defaults to partnership taxation (Form 1065, K-1s to each of you), but depending on your projected volume and income, an S-corp election could save you a meaningful amount in SE tax. That's a conversation worth having with a CPA before you file your articles.

On the operating agreement question, I'd strongly recommend a lawyer for a family partnership rather than an online template. It's not just about the boilerplate stuff. You need clear language around capital contributions (who's putting in what), profit and loss allocation (does it match ownership percentages or is there a preferred return?), management responsibilities, and what happens if one of you wants out. Online templates almost never handle those items well, and a poorly drafted OA between family members is a recipe for problems down the road. A good real estate attorney in the Detroit area should be able to draft something solid for a reasonable flat fee.