I'm currently in a partnership with 15 other investors. A multi family property was purchased which is going to be put in the name of the LLC formed with these investors. I have an offering letter I signed, had reviewed by an attorney. So the ambiguous part is we need to wire transfer money (our contribution to this LLC) to the bank directly in the name of the LLC, however the LLC hasn't been solidified yet. It's semi chicken and the egg problem. I need to pay my portion to be part of the LLC yet I don't really want to pay until I know I'm part of this LLC.
How can this be rectified? How is it normally handled? Someone mentioned and escrow account is the way to go but even then I'm not clear on how the escrow account will protect me and if there's anything special that is needed when setting up the escrow account.
Advise much appreciated!
Did your attorney prepare an operating agreement for your LLC? This document is crucial to any multi-member LLC operation.
The operating agreement can and often does include a subsection detailing the initial contributions and how they will be handled or spent. If the document adequately describes how the funds will be used, you can rest assured that you are protected regardless of whether the organization fee has been paid to the state or not.
When I form an LLC for a client, I will include the price of the state filing fee in my fee, and during the signing ceremony each member writes a check to my trust account for their pro-rata share. Once the state approves the filing and returns a certificate of organization, any LLC member can then take that certificate to the bank and open a business checking account.
Generally speaking, you will not be able to initiate a bank account under the LLC's name unless and until the LLC has been approved and certified by the California Secretary of State. It is understandable that none of the investors would want to cut a check to an individual prior to the LLC being created, so your options are to: a) have everybody wait until you receive the Certificate of Incorporation, open up the bank account as quickly as possible, and then cut the checks; or b) (as sagely suggested by the prior poster) have the checks made out to your attorney, and placed in the attorney's Client Trust Account, to be held in trust until the bank account has been established, at which time the attorney can write a check to the LLC.
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