Newbie Biz Partners

8 Replies

Greetings BP.   I'm getting into the game with my wife, cousin, and a friend.  So really it's a 3 person team, counting myself and wife as 1.  We are wanting to form a business entity before we really get out there.  Our initial strategies will be assignments, sub 2, and maybe assumption.  That being said, I just feel that's a lot of mouths to feed when the potential for profit really isn't that great.  The initial thought was to hold whatever profits for capital to be able to eventually obtain these properties for rehab and flip. We would also then need to decide on how and when we would pay ourselves under this single LLC as well as how we will govern each other.   Another thought I am having would be to set up a series LLC where we have the shell company and 3 other series underneath that one to be run by each member of the shell.  This way each member is responsible for their own wholesale dealings.  I am also thinking that later down the roads these series can then later partner on rehab deals with everybody getting a share of the profits based on contributions.  Any feedback is greatly appreciated.

I like that idea.  You could even have an incentive for deals, like $100 per completed deal.  The rest can be put into the capital reserves.  

If your plan is to buy and hold with your partners look at an LLC. If you plan to wholesale/flip you should look into an S-Corp. Each has pros and cons for buy/hold vs. short term investments. Good luck @Amil Spencer

Thanks for the feedback. @Paul Brockmann the incentive suggestion is a good idea. Any particular thought on the series LLC concept?

Amil, here is what i have done in the past with LLCs and partners.

There was one main operating llc that i controlled since i was the leader on the endeavor. We then had two business partners whom we were not ready to officially give ownership to the business yet in case things did not work out. We then had each partner create their own llc. These two llcs were then "contracted" by my llc. Business was ran through my main llc, but when a deal was brought by one of the partners and it was time to payout, we had a contract stating that 35 percent stayed in the main llc operating account and the rest was paid out to all 3 llcs based on the defined disbursement agreement. This disbursement agreement was on a per property basis, only thing that never changed was the 35 percent. This made it so before we inked a deal, all three of us would determine our role on the property, come up with split of remaining 65 percent, and then write it in our agreement for that property. This was always done so when the money came, we knew exactly where it was going and no hard feelings. Hope this is making sense so far.

This worked out in the end, one partner kicked butt and the other did not. It was easy later to just not have the bad partner under contract with us and then make the good partner a real partner in the business. This made things nice and smooth at least from my experience.

@Tarl Yarber as a matter of reference, how many properties do you own personally (including properties you own a percentage share of through an LLC) and approximately what is the total asset value?

@Rob Beland I personally have at this time twelve properties in active rehab in WA, this doesn't include those on market or in escrow for us reselling and or buying. Maybe i should have clarified that i 100 percent flip and wholesale in WA. We are currently buying rentals in Chicago however. I average about 6 flips a month right now. The partnership i discussed above is in regards to an off market lead gen business we had started a couple years ago and still run today. The person who started this thread referenced wanting to do wholesaling in addition to subject to and such so i thought it a good suggestion from my exp.

Our main LLC is taxed as an S corp and all the many many sub llcs are pass throughs.

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