Does anyone here have any experience forming an LLC so that a group of people (2+) can share the profits/liabilities on purchasing real estate?? If so, what general advice would you have wanted from the get go?? (Assume no personality conflicts will arise. We're well aware of that possibility, but feel we've known each other long enough and are close enough that no character issues will interfere with our goals.). Thanks in advance.
All the best,
You just need to file for a Texas LLC and draft an Operating Agreement for the LLC. After that you grab a taxpayer identification number from the IRS and set up a bank account. After that you deposit money to the bank and buy stuff. At the end of the year you file a tax return for the LLC and each member gets a K-1 to file with their personal returns.
Message me if you have any questions.
I would go with an S-Corp over an LLC. There are many reasons to choose either but a big one is that with an LLC, the "members" are considered self-employed and are subject to the 15% self-employment tax towards medicare and social security. This must be paid on the entire net profit of the LLC annually. This is not the case with an S-Corp. There are distinct differences with respect to what happens if a member of an LLC dies or wants out vs a shareholder of an S-Corp and the lifespan of each type of entity must be taken into consideration depending on your future plans for employees, expansion, etc... LLC's have a finite lifespan. S-Corps can go on forever. Just my opinion. I'm sure you can see pros and cons with both options. S-Corps have more filing to do annually and must have shareholder meetings and minutes kept but it's really not a big deal.
Talk to a tax adviser. Texas has some strange LLC taxation laws. A limited partnership is also an option.
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