So I am starting a partnership with two friends, and we're about ready to get into our first deal. We've found an off-market deal, and we could move on it fairly quickly.
We have yet to set up an LLC. I've talked to local counsel, and the first person I've talked to has an hourly rate of $250/hr billed in 6-minute increments. He assumed it would take between 2 and 3 hours to set it up, plus filing fees. The total cost of $850ish.
LegalZoom has an express plan that is $359 for their full package, plus filing fees totaling about $500. They'd give me basically what I'd get for around $850. Is it worth the extra $350 to go to someone local and start building that relationship, or would anyone speak highly of the LegalZoom process?
You could shop around and get a price from another attorney, one who perhaps specializes in real estate business. LegalZoom is generally pretty basic and might not include some useful language that a knowledgeable attorney would. I'd recommend to get another pricing first.
I went the route of legalzoom for one of our llc's. It was simple and worked out fine, but it was for my wife and I. The llc didn't require much, and it was pretty straight forward, so no complaints there. However, I also had my CPA and our lawyer each set one up for us, they charged us approx. the same amount (maybe a little more), but it was a little more complex. So if you're fairly savy with all the legalities, it shouldn't be a problem. Otherwise, I would continue to ask around to see what others are offering. I know this isn't a black and white answer, but I hope it helps in some way. My personal recommendation is seek higher qualified personnel. Good luck!!!
Hi @Kevin Mosier ,
If setting up an LLC in Wisconsin is anything like Michigan (after glancing online, it looks like it is), you do not need a lawyer. I have created several LLCs in Michigan, it only takes a couple hours to fill out the proper paperwork. Since you are going in with partners, the greatest time spent will be on your Operating Agreement. The Operating Agreement is a legal document that will outline your partnership rules. There are a lot of great templates online for OAs. This guide should help for the whole process: https://www.nolo.com/legal-encyclopedia/wisconsin-...
If you are more comfortable having a lawyer put this all together, by all means do so. But I don't think it's necessary. Best of luck!
It's important that your partnership agreement spell out EXACTLY what you want. Outlining everyones responsibilities, contributions and potential dissolution. For example: What happens when a partners dies? Do you want to be partners with their spouse (if they have one)? Without that spelled out in the agreement you very might be partners with their spouse and that may be the last situation you want to be in. I doubt LegalZoom will cover the details that should be covered.
Kevin Mosier in short, use the attorney. I work with investors who have low bid syndrome and do the DIY route. It ends up costing more money because they have to have an attorney fix their mistakes or missteps eventually. Secondly, there are a lot more moving parts when you have a multi member LLC. This additional element adds complexity which you want set up right on the front end, because it can cost you way more on the back end.
Plus, to your point. You will be starting a relationship with an attorney who is a key person in making or breaking your deals. Relationship are extremely important in Real Estate. You will learn over time that Relationships are your greatest asset.
I would use an attorney, especially in your situation. As others have said, the operating agreement will be key for you and it's worth the extra attention to detail from a local expert on the front end. Mine cost around $450 but was single member LLC.
This is NOT legal advice, BUT, If it's a single member simple LLC, legalzoom (or even doing it yourself) is really find. If you have partners, absolutely get a lawyer involved. I've seen so many disasters when people try to do them on their own or using an online program that can't anticipate specific details of your transaction or partnership.
@Jessica Zolotorofe really hit it on the head. I paid a lawyer to set up my single member LLC and it cost about 800, including filing fees.
If I had to do it again I’d just use legal zoom or what have you. However if you’re partnering with someone it’s better to have an attorney do it.
No legal advice given
Thanks for the input, all. I met with a lawyer last week and we're going to be at about $850 out the door for a three-member LLC, and I'll have the peace of mind that it was done right. Hopefully.
If it takes 2-3 hours and includes the operating agreement then your attorney isn’t doing anything other than using a form which always needs to be revised significantly to match the interest of the partnership. If your going to do it, spend the money and do it correctly.
I used TotalLegal.com a bit cheaper than legal zoom! And if have problems or questions they are quick to help me thru their 1800 #!
@Kevin Mosier I used to use boilerplate partnership agreements, but I now find it worthwhile to have an attorney set it up and put practices in place for you to make sure the corporate veil can't be pierced. Just setting up an LLC doesn't provide you much liability protection.
form the llc online yourself (its about $100 in GA). Pay the attorney for the operating agreement.
That's a good idea, I'll think about that for the next one. I've already committed to having this done with a lawyer. I'll feel good about knowing it's done right.
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