General Partnership or LLC?
Hi,
My husband and I have partnered with another person and we have begun to buy rental properties together (we are about to close on one property, and in escrow on another). We own 50% of the properties and our partner owns 50%. We are trying to figure out what makes the most sense to keep us all protected from liability, and each other (in the even that something goes wrong/someone dies/divorce etc... all those fun things to think about :). We all get along really well and are hoping that this will become a fruitful relationship with many flips/rentals over the years. We were thinking that we should either form an LLC or a general partnership, unless there is another avenue that makes the most sense.
When we spoke to a lawyer he advised us to get a separate LLC for each property we own as it can be cumbersome to have multiple properties under one LLC especially if you want to do any 1031 exchanges, which we are thinking that we will at some point. We live in California but are investing in Michigan. I know in CA it is quite costly to set up an LLC and the thought of setting one up for each property we own sounds unappealing, unnecessary and expensive.
What are some of your thoughts on this?
-Would we be wise to just set up a general partnership and draft something up with a lawyer, then put the properties under the name of the partnership? If so, can you obtain liability insurance for a partnership?
-Is it necessary to set-up an LLC? If so, is it truly necessary to have separate LLC for each property?
-If the safest route is to set-up an LLC does it have to be in California or would it be better to have it in Michigan?
I know there are a lot of people in a similar situation as us so it would be great to get some feedback from all you much smarter and more experienced investors out there!
Thank you in advance for any and all help :)
-Molly