Please Advise - Starting to Flip Again With Partner

4 Replies

Could you please help me design the perfect setup.

I have flipped before and under an LLC and am starting to ramp back up.

I am very good at taxes and don't want a full partnership to influence all of my deductions. Therefore I was thinking it would be best to start a business and have my partner start a business. Then both of our businesses would own one company. Is that possible? If it is possible what are the pros and cons.

Another method I had thought of is a business venture together.

Thanks in advance.

Not sure of all of the ins/outs of it, but I just established a "Series LLC", which is popular in real estate investing (my business isn't even REI, yet), because you set up a "parent" and then underneath that, you can set up numerous other companies/brands in a "series". Each of the "series" are they're own separate entity, siloed off so they can be sold separately, as well as sued separately (hopefully not) to protect the assets of all the others.

Think an arrangement like this would help? I do know it's only available in some states, though. http://en.wikipedia.org/wiki/Series_LLC

Joe, I really appreciate the reply. Is that the same thing as a DBA (Doing Business As)?

The problem I have is coming up with a method that both parties own the house etc... but we are able to split the profits legally. Also to ensure to don't really screw ourselves when it comes to taxes.

That is why I thought two companies owning one property may be the best.

Are you suggested that in a series I could create a separate company for each flip?

Bryce, in California many investors that partner on deals will each have their own LLC, and their LLC's will partner in a LLP. In forming the LLP it is very important to in the operating agreement to structure roles, exit of the LLP( for instance whether you just want the partnership for 1 deal or to continue for several.

A additional method that would have a better tax advantage would be to create 2 business trust, that partner in a LLP or LLC. This is a advantage in California. As Series LLC's are not recognized in California.

Jonathan,

I thought corps couldnt own a LLP just a LLC.

Limited Liability Company

LLC owners, called "members," can manage their businesses or hire professional managers. In addition, LLCs enjoy a lot of flexibility. For instance, they can have as many members as they like, and corporations are allowed to be members. LLCs enjoy freedom from the state-mandated membership and management reporting requirements that corporations have. Most important, LLCs do not have to pay taxes. Instead, their profits and losses are passed through to their members' individual tax returns in the same way as a partnership. As a result, members enjoy the advantages of avoiding the "double taxation" of corporations as well as receiving tax relief from the poor performance of their LLCs.

Limited Liability Partnership

LLPs have the same tax advantages of LLCs. They cannot, however, have corporations as owners. Perhaps the most significant difference between LLCs and LLPs is that LLPs must have at least one managing partner who bears liability for the partnership's actions. With an LLP, whoever is in charge is legally exposed in the same way owners of a simple partnership are exposed. Silent partners and investors in an LLP receive liability protection as long as they do not take on a managerial role. If they do, a court could pierce the veil of liability protection.

That being said, would it be best for each of us to own a S-Corp then form a LLC and both S-Corps wold be owners of that.

Thanks,

Bryce

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