Having an LLC and entering a partnership?

7 Replies

I tried to do some research online on this topic and it seems to be somewhat vague. If I have an LLC and I find an individual who I want to partner with, do I have to enter that partnership as an individual or can I enter into the partnership under my LLC? Does this make things more complicated?

Originally posted by @Shane Malloy :

I tried to do some research online on this topic and it seems to be somewhat vague. If I have an LLC and I find an individual who I want to partner with, do I have to enter that partnership as an individual or can I enter into the partnership under my LLC? Does this make things more complicated?

You certainly can partner as an LLC. If you're the only owner (member) of the LLC, it will normally be disregarded for tax purposes. In this case, there're no complications that I can think of.

If your LLC is not disregarded but, say, taxed as an S-corporation - then yes, it will be more complicated.

On a related note - avoid partnerships unless you absolutely have to form one. There're much better ways to structure doing business between 2 people than the standard 50/50 partnership.

@Michael Plaks I'd be interested to hear your thoughts on what would be a better structure than a traditional LLC for partnering on buy and hold properties.

Our plan at this point would be for my partner to bring the 20-25% down payment from either cash funds or a SDIRA, I would do all acquisition, rehab and PM after we get it rented. We would be looking at at least a 10 year hold period. 

Our thought had been to do an LLC with 50-50 ownership. I do have an existing relationship with a commercial portfolio lender who is comfortable loaning to LLC in this fashion, and I assume would be open to other structures too.

Thanks, Dan Dietz

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Originally posted by @Daniel Dietz :

@Michael Plaks I'd be interested to hear your thoughts on what would be a better structure than a traditional LLC for partnering on buy and hold properties.

Our plan at this point would be for my partner to bring the 20-25% down payment from either cash funds or a SDIRA, I would do all acquisition, rehab and PM after we get it rented. We would be looking at at least a 10 year hold period. 

Our thought had been to do an LLC with 50-50 ownership. I do have an existing relationship with a commercial portfolio lender who is comfortable loaning to LLC in this fashion, and I assume would be open to other structures too.

Thanks, Dan Dietz

In your situation, I recommend you retain 100% ownership of the LLC and the property, and your partner takes the position of a lender with a lien against the property.

@Michael Plaks   Thanks for confirming.  I figured as much but could not find an article that really spelled this out.

Would you mind expanding on better options that a 50/50 partnership?  What would be a better approach for a first time investor?    

Originally posted by @Shane Malloy :

@Michael Plaks  Thanks for confirming.  I figured as much but could not find an article that really spelled this out.

Would you mind expanding on better options that a 50/50 partnership?  What would be a better approach for a first time investor?    

a. One partner retains 100% ownership, and the other is a lender. 

b. One partner retains 100% ownership, and the other is a contractor.

c. 60/40, 90/10 or anything except 50/50 (which deadlocks you on any future decision where you disagree)

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