Alright Bigger Pockets Peeps,
My wife and I are thinking about setting up an LLP to invest in real estate and I wanted to know if anyone has experience with the benefits associated with being a "woman owned business." Should we set our partnership up with my wife as a majority partner and why?
In REI I don't think that you would really receive any of the typical benefits. Now having her with you and even her talking to people will be a huge blessing for you. In sales women in general do have an edge. Guys don't like telling them they can't afford something. Women are faster to trust other women. It also can sound more professional when you have more then one individual that your clients are speaking with. Plus most people like dealing with families. So a husband and wife team could be awesome. (My wife has 0 interest in REI unfortunately) However I do have an awesome business partner.
I would NEVER give ANYONE control of a company I own. Especially if it is something you guys plan on building into an empire. All of your hard work could be changed without your consent. I have had buddies get burned by spouses when relationships went south. I would never speak that or wish that upon anyone but I've seen it happen. My business partner and I have a truly 50/50 arraignment. We split the work, profit, time, and decisions.
"The woman business owner must also demonstrate the ability to perform in the area of expertise without reliance on financing or resources from a firm that is not woman-owned."
Looks like that would seriously limit your financing options as well.
Why did you decide on an LLC as opposed to an LLP?
Good question. Honestly we decided after viewing the pros/cons that an LLC was just more convenient. We don't really use it for "protection" we have a multi-million dollar liability umbrella policy for that. In Missouri the LLC literally took us 20 minutes and $50.00 to set up. When we get into apartment homes and things of that nature we may need to reevaluate however for our SFR rentals, wholesales, and flips it does the trick for now.
Thanks for the insight Ryan. That is very helpful.
One thought about:
- "I would NEVER give ANYONE control of a company I own. ... I have had buddies get burned by spouses when relationships went south. ... My business partner and I have a truly 50/50 arraignment. We split the work, profit, time, and decisions."
I recognize the concern of letting someone else make decisions for me, but when it comes to my wife, I have no hesitation. The desire to preserve what one builds is valid, but we should spend more time building up our spouse than building up our business. Either can be taken from us at any time, but we can always rebuild a business.
A business partner may be terrific, but a wife is the greatest treasure a man will ever have. So, if I ever begin to experience any divided loyalties, I always default to her. Even if it would mean losing millions. I know I will never regret making her happy, and when she sees that in me, she knows she can trust me to make decisions, even if she is nervous.
I am not preaching, just testifying to my own experience.
The only thing I can think of where the "woman owned business" thing would even apply would be an SBA loan and those are not available for real estate investment. Real estate is pretty darn tax-advantaged already, so IMHO it's probably not worth your time to jump through a lot of hoops trying to make it more so.
Also, wouldn't an LLP require you to file a separate tax return for the partnership? Why not just invest in your own names, at least at first? You could use a LLC, which is a pass-through entity for tax purposes, but (depending on what you're buying) it can be harder to get loans. You may just want to find an accountant who has an investment RE specialty and consult with them before you proceed with forming an entity.
@Brian Tome I completely respect you and agree with your point of view. I am young and married younger. I'm 21 and just celebrated my 1st anniversary. We don't believe in divorce and its not even a word we use in our home. So I would have no problem with my wife being a majority holder. It sounds like you guys have a great marriage. Which is a blessing. That is not something you find very often. If you are giving your wife 51 % as a labor of love that is excellent. You are right however in that a spouse is different then a business partner. By no means did you come off preachy so need for apologies. I appreciate you being forthright.
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