S Corp and LLC...what are the steps?

Question

I am going on a joint venture 50/50. We want to start an S corp and LLC . We will eventually branch of. Please explain to me exactly how that works. If we create an S corp would we then individually create our own LLC? I would call my LLC ...and she would call hers something else. If and when we decide to go our separate ways, would we then create our own Scorp? If I am completely wrong please let me know. Thanks in advance.

Ericilda Witherspoon · Answer

@Michael Plaks Thank you. Trust me I've already thinking of that. Someone told me about us both having an LLC and doing it that way. We already have different opinions on if we should start a passive income or start flipping first. I say flipping first so yeah... we work well together; but once money gets involved I can't say there won't be issues.

Michael Plaks · Answer

@Ericilda Witherspoon

The only thing worse than 50/50 partnerships is a handshake partnership. It's like a marriage - easy to get into, but good luck trying to go your separate ways. And you don't even have to experience something truly dramatic. You can have a dead-end disagreements on every issue along the way. Who worked more? Who contributed more? Do we keep this contractor or fire him? Do we give a discount or not? Do we buy a cheaper grade flooring?  And on and on and on...

The worst is when something goes wrong, and something eventually will. Everybody is willing to split profits 50/50, but they forget about splitting losses and costs 50/50. Say the rehab needs another $10k to finish. You bring $5k, but your partner is short this month and cannot do his/her half. What do you do?

Or your partner gets sick, gets a job out of town, divorces/marries, etc.

Short story: AVOID all partnerships, especially 50/50.

A far superior way of working together is having ONE of the partners run the deal as 100% his/hers, and the other partner becoming either a contractor or a lender. You can still split the money 50/50 in the end, provided there's something to split. But you will eliminate 90% of all problems, and you will be better friends and more efficient partners.

Jason Vo · Answer

I just did the same thing with my partner in Texas. Our LLC is an S-corp, and both of us are under the same LLC name. S-corp is just a tax classification when forming an LLC, you have an option to choose between C-corp or S-corp.

Steve Vaughan · Answer

If buying a small residential property 50/50 with debt, I would seriously consider just buying as tenants in common (TIC) with % listed and have a simple JV agreement that outlines the Ds.

I have an s-corp for portfolio mgt and LLCs, but they are for a specific purpose and for specific asset types, like commercial long-term b&h's.

I can't guess what place an s-corp would have in your scenario.  To manage it?  You can establish that later if you want.  If flipping with cash/no debt, you can be taxed as an s-corp inside your LLC.  Just don't put it in an LLC and wonder why all your financing options are crappy.

Ericilda Witherspoon · Answer

@Jason Vo No. I don't think so. .Doing Business As? I have to really figure out what the best way is. It would be easier if I did it myself.  Thanks for your help.

Ericilda Witherspoon · Answer

@Michael Plaks Thank you. Trust me I've already thinking of that. Someone told me about us both having an LLC and doing it that way. We already have different opinions on if we should start a passive income or start flipping first. I say flipping first so yeah...  we work well together; but once money gets involved I can't say there won't be issues.

Jason Vo · Answer

As far as I know, you can do DBAs under one LLC. Is that what you are looking for?

Ericilda Witherspoon · Answer

Thank you. What if we both eventually  go our separate ways and do our own business would we have to dissolve that  LLC ? I'm trying to create something where we are under an umbrella. Is that possible? Is it a series LLC?

S Corp and LLC...what are the steps?

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