How do I structure my LLC if I planned on acquiring Investors

Question

So I've been breaking my head for the past couple of weeks, and no accountant or attorney have been able to point me in the right direction for how my LLC should be structured. (Disclosure I'm a Newbie investor, for now) (New Jersey)

Basically my business will work this way. I'll look for an investor then find a deal. He funds the full deal from property acquisition to renovation, etc. I ran the whole project and he'll just be updated on progress. After we sell the property we will splits profits as agreed upon, (30/70, 40/60)whichever. So here's my question, how/what is the best way to structure this business Model. I will be full owner of my LLC, ABC LLC, but I do not want to add investors as partners in my business because I do not want to end up with 10 different partners under my LLC as my business grows. Each investor will fund their seperate deal, Investor A gives me funds we buy Property A, investors B gives me funds we buy Property B and so on.

How do I structure this model, do I need new LLC with each investor I get, Limited Partnerships, have my LLC be the parent company of the others LLC, any ideas or can someone clarify this or even ask questions to maybe help me figure this out.

Sean Morrison · Answer

@Eamonn McElroy is right, don't rely on an accountant to discuss legal liability, and don't count on me to give tax or financial advice (by the way, I'm not providing legal advice here, just sharing some common practices). As a general rule, single-member LLCs are the easiest to pierce the corporate veil. It's tougher when there's partners. If your LLC partners with others in a new LLC, you have a two corporate layers of protection, plus whatever insurance you have.

The other thing to keep in mind is that bringing in investors is going to be dipping into securities law. You need to make sure somebody can walk you through that side as well.

Shawn Mcenteer · Answer

@Marco Cruz pm if you need an attorney recommendation. His fee will likely be to set up the LLC for you which you'll have to pay for one way or another.

Eamonn McElroy · Answer

@Marco Cruz

"got discouraged by an accountant who told me that I may loose my liability protection if my LLC is a member of others"

An accountant shouldn't be providing legal advice. And if they do you should take it with a grain of salt unless they are also licensed to practice law.

"So I've been breaking my head for the past couple of weeks, and no accountant or attorney have been able to point me in the right direction for how my LLC should be structured."

I'm always skeptical when I hear this. How many of these accountants and attorney did you enter into a paid consulting engagement with?

Most aren't going to provide free, fact specific advice to a prospect, and the ones that do...the advice is worth exactly what you paid for it.

Marco Cruz · Answer

Hey Sean, thank you for your reply!

Initially this was how I wanted to structure my business but got discouraged by an accountant who told me that I may loose my liability protection if my LLC is a member of others. I am not sure how true this is or if it would just be more paper work and organization which is not problem but maybe you'll be able to clarify that for me.

Thank you!

Sean Morrison · Answer

If each investor is doing a different deal, then your options are to create a new LLC for each deal with your LLC as one of the members (great idea) or simply have your LLC put together a joint venture agreement with the investment partner. The joint venture process won't give you the same asset protection though.

How do I structure my LLC if I planned on acquiring Investors

How do I structure my LLC if I planned on acquiring Investors

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