Form LLC in Louisiana?

Question

Completely new. I have no properties yet, but I am in the process of teaming up with two others for the purpose of investing in a triplex or four-plex. The other two will be investing more money than me, but I will do most of the managing and networking. My question is this:

Should we form an LLC (in Louisiana) to buy our first property? If we do form one, and we all become 1/3 owners, does that mean revenue will be split into thirds? Or do we decide that? And in simple terms, how would taxes work if we make an LLC?

Any help or advice is greatly appreciated!

Robert Leonard · Answer

The answers to those questions are very simple for an individual but can get real complicated with 3 partners.  Much of the answer is negotiable when you talk about profit splits versus contributions.

You need a good attorney to prepare a well thought out operating agreement that will cover all of those concerns.

Jeff V. · Answer

@Marcus Guidry

Should we form an LLC (in Louisiana) to buy our first property?

Just be sure that your aware of the Legal, Tax and Financing Implications of doing so.  In other words see your CPA, Attorney and Lenders to get the facts on how an LLC will effect those 3 areas.

LLC offers some liability protection and generally works well for partnerships also offers some tax flexability...  you can elect for different taxation rules when forming the LLC.If we do form one, and we all become 1/3 owners, does that mean revenue will be split into thirds?

This will be defined in a good operating agreement that is drafted by an attorney.   Just a suggestion...  Have your own attorney look it over to protect your interests, as well as your partner's respective attorney's to protect theirs.  If you have only 1 attorney look at it you could save some money but which one of the 3 partners interests would he/she be representing?

Partnerships are like marriage...  a high percentage end up in divorce...  be sure to have it laid out in the operating agreement how issues will be resolved between partners and how the partnership will be dissolved in the event a resolution can't be found.

This is not an exhaustive list, but some things to think about.

And in simple terms, how would taxes work if we make an LLC?

According to your operating agreement profits would be divided up...  Monthly, Quarterly, Annually...   and put in to the respective partner's equity accounts available for draws.  At the end of the year the CPA will generate K1's for each partner to use when filing their personal taxes.  The LLC will have to file these earning reports on secretary of state website annually for the annual report.  This keeps your LLC valid in the state.

Hope this helps.

Jeff V

Marcus Guidry · Answer

Thank you both very much. The underlying answer I'm getting is "make sure y'all get a good attorney." I'll be sure to search one out and discuss this with my partners.

Thanks again.