What is the best way to structure a joint venture

2 Replies

I'm starting a joint venture with a partner and we've completed and signed a Joint Venture agreement. We each have our own individual business entities already setup going into this. One has an LLC and the other an S-Corp. I would like to know if anyone has any recommendations on whether or not setting up a third business entity for the joint venture itself like an LLC and if it is worth the effort and expense.

It depends on the length of the venture.  I'm not an attorney, but I would think that its best to start a new entity for the new venture, everything is handled for that venture through that entity.  Just my 2 cents worth.

I have recently partnered up with someone on a rehab, since we aren't using any financing it cuts out some of the hassle. I know its not traditional, but, we are equal share. The tile will be held in the partner's LLC and I will hold a 1st position mortgage against the property.

In TX, the advice would be to never form a JV unless required by law or for a very specific advantage for your proposed transaction. A JV is just a general partnership; "JV" means that the GP is limited to a single property or endeavor. There is unlimited liability of all partners in a JV and YOU are liable for the actions of ALL your other partners. You'll see JV's composed of LLCs and other entities occasionally in syndications and low income housing tax credit deals. And I still don't like 'em even then.

So, makes more sense to usually form a member-managed LLC if you really want the management aspects of a JV but the flexibility and liability protection of an LLC.

Your state may be different. You should talk to a lawyer in your state.

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