How Best to Grant Others Power to Act on Behalf of LLC

8 Replies

Hello,

So I have an LLC established in North Carolina. I am looking to expand in to the New Jersey market. I have two friends in NJ who are going to act on behalf of the LLC in that state. What is the best model to establish? Do I make them managers? Do we make them agents? Do I execute a power of attorney? If I do execute a power of attorney on behalf of the LLC, won't it transfer power from me to my friends?

First, you need to Foreign File in NJ to operate in that state, the NC LLC is not portable without such a filing.

A clearly written POA enumerating the powers granted would be a protection for everyone.

This is my personal opinion, so seek legal counsel.

@Jeff B. 's approach is one way to do it. You could also create a new LLC in NJ for the NJ properties, and have a manager resolution or a manager agreement for that LLC, depending on how structured you want to be. I'd suggest this option so your North Carolina property is separate and protected, in case these friends screw anything up.

Samuel,

Ideally we would like to establish an LLC in NJ, or a Partnership, with an equal ownership share. The issue is this. My LLC in NC is pre-approved for a hard-money loan at an exceptional rate. My partners in NJ do not have as good credit. We are concerned that putting all three of us on the charter will reduce our borrowing potential with lenders. So we are trying to figure out the best way to be equal partners without sacrificing our ability to borrow. The business structure is where we are struggling. If I were to establish an LLC in NJ as sole owner, can I assign both as managers or does there have to be a sole business manager? I've been trying to research that question and can't find an answer. I suppose I could always hire them as Independent Contractors as pay them via a W-9, but that's not really our intent. We would really like to have equal ownership.

You need the NJ LLC one way or another. Your 'equal partners' is a separate issue AND for someone to manage NJ properties, they must be co-owners OR a property manager. The POA gives them the authority to act in your behave; The W-9 does none of the above -- that a tax doc.

I would make them MEMBERS and then use the S-Corp pass thru for taxes.

@Jeff B.  :  https://www.biggerpockets.com/forums/311/topics/370169-proper-business-model?page=1#p2345611

@Steve Vaughan , @Jason Timmerman

My point is using an LLC created in one state to do business in some other is incorrect and any property titled in the second state could easily be challenged - - maybe revoked - - or even result in punitive damages from the State.

The second point is about property management is not willy-nilly and has requirements other that just a simple oral  or handshake agreement.

YES, both points are not on the subject, but no one was providing any guidance that was obviously needed, at least obvious to me, so in the spirit of BP, I spoke up.  

I can only lead to where the water is located and can't make'm drink. Guess I bugged you; sorry.

Jeff,

Thank you for the response. I'm not sure why Steve is so hostile. We have established an LLC in NJ but I will secure the loan and purchase property in my own name and then execute a Deed of Transfer moving the property from my personal possession to that of the LLC. This way, we can benefit from my pre-approval and then hopefully put some assets into the LLC which will make it easier to obtain favorable loan rates in the future.

Originally posted by @Jason Timmerman :

Jeff,

Thank you for the response. I'm not sure why Steve is so hostile. We have established an LLC in NJ but I will secure the loan and purchase property in my own name and then execute a Deed of Transfer moving the property from my personal possession to that of the LLC. This way, we can benefit from my pre-approval and then hopefully put some assets into the LLC which will make it easier to obtain favorable loan rates in the future.

 BRAVO.  The issue is to be INFORMED - - once there, it's all up to you.

Best wishes in your REI experiences.

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