Lawyers get paid by the billable hour. If they don't see a problem then they have nothing to bill you for. It is likely that one of these lawyers is trying to milk one of you. How about, you and your partner find a 3rd attorney to draft the document. If you cant agree on a lawyer, you might not survive as partners.
My business partner has engaged an attorney for the LLC (not LP) to draft a "partnership" agreement.
I’ve passed the agreement to my attorney and she insists on:
1- my business partner downloaded a templates and drafted himself (which he did not)
2- the “partnership” agreement is incorrect and needs to be completely rewritten as it’s structured as a Limited Partnership Agreement
I am at a loss here because the attorney my partner engaged insists that she’s right and my attorney insists that the other attorney is wrong.
Any insight to whether or not this has happened to you?
Thank you.
Sincerely,
Alice
All this and you're barely getting started.
Why do a partnership? Are each of you bringing key components to the enterprise other than capital?
I have sellers and lenders but not equity partners. Wondering what the purpose of the LLC is? The purpose of each member specifically?
I have a couple immediate family member LLCs for different commercial buy and holds. My attorney drafted an OA we could use with outside partner members if we ever needed them. All stips outlined in the OA, not a partnership agreement.
@Alice Huang the article @Chase Cannon posted suggests to me that it might be common in TX for the operating company to be an LP, with the partners themselves being LLCs. Meaning that you form your own LLC, which becomes a partner in the LP, and your partner is free to structure whatever liability protection he or she desires independent of you. The LP itself doesn't provide liability protection.
I’m Canadian and he’s American. As now right now, thanks to covid, my visa application is delayed, so I cannot borrow. While we’re still working out the financing, he’s the only person who can borrow (taking on 100% of the debt) and the profit is split 50/50.
Of course there’s the gentleman’s agreement, but I’d feel much more comfortable having it in writing that I have the full intention of being 50/50 liability on the debt with my business partner. It’s only fair that he needs to be protected.
100% these kinks need to be ironed out upfront for an ideally 30 year business partnership. We’re not buying and holding one off properties but our business plan entails a long term plan, where eventually my background in new builds in Canada, Australia and the UK would come in handy.
Thank you Dan. Will need to research more and discuss with my partner and attorney on what is the best structure. As mentioned before, we do have long term plans, so we’re taking this very seriously.
@Alice Huang If you are referring to the use of common law in the U.S., yes. The U.S. is heavily reliant on a common law system, using prior cases to determine future precedent. If you are referring to commonwealth vs. statehood, there are 4 commonwealths in the U.S., but none of the 4 are Texas. In your situation, I would spend the majority of my time understanding the intricacies of Texas business law as it seems slightly unique.
In regards to the conflict of interest issue, it seems your attorney is being cautious about whether they can serve your best interest and your LLCs best interest at the same time. In PA and GA, it is allowed to have both parties sign a conflict-of-interest waiver if one person insists that their attorney represent both the LLC and themselves. However, if it were me, I would find another attorney who specializes in business law to advise you on the LLC and keep your regular attorney for the usually matters. Again, it probably will be more money, but getting this wrong could end up being more expensive.
@Alice Huang If you are referring to the use of common law in the U.S., yes. The U.S. is heavily reliant on a common law system, using prior cases to determine future precedent. If you are referring to commonwealth vs. statehood, there are 4 commonwealths in the U.S., but none of the 4 are Texas. In your situation, I would spend the majority of my time understanding the intricacies of Texas business law as it seems slightly unique.
In regards to the conflict of interest issue, it seems your attorney is being cautious about whether they can serve your best interest and your LLCs best interest at the same time. In PA and GA, it is allowed to have both parties sign a conflict-of-interest waiver if one person insists that their attorney represent both the LLC and themselves. However, if it were me, I would find another attorney who specializes in business law to advise you on the LLC and keep your regular attorney for the usually matters. Again, it probably will be more money, but getting this wrong could end up being more expensive.
Thank you again Chase for the great insight! Will study up on Texas law. Much appreciated it and hope other BP members can benefit as well.
My attorney is a real estate attorney, recommended by my trusted real estate CPA. I've been in contact with her when I was still in Texas. The LLC attorney I am more worried about as I am not sure how my business partner found her and whether or not she specialises in real estate.
A lot for us to consider. Thank you. Will go through everything again with my business partner.
Ok no problem. Have your attorney draft a version of the OA that best suits your needs and if he/she has to start from scratch do be it
Then send it to your partner and have him/her review it and adjust it as needed
You may go back and forth a couple of times but once you will get started, your partnership will have clarity and all will be spelled out in writing
In my experience, attorneys are the least educated expensive part in a transaction. Especially if you retain them early on.
I usually have the attorneys hash it out and they always reach a reasonable compromise so long as you and your partner stay in open and respectful communication regarding the key points in the agreement
Ok no problem. Have your attorney draft a version of the OA that best suits your needs and if he/she has to start from scratch do be it
Then send it to your partner and have him/her review it and adjust it as needed
You may go back and forth a couple of times but once you will get started, your partnership will have clarity and all will be spelled out in writing
In my experience, attorneys are the least educated expensive part in a transaction. Especially if you retain them early on.
I usually have the attorneys hash it out and they always reach a reasonable compromise so long as you and your partner stay in open and respectful communication regarding the key points in the agreement
Ok no problem. Have your attorney draft a version of the OA that best suits your needs and if he/she has to start from scratch do be it
Then send it to your partner and have him/her review it and adjust it as needed
You may go back and forth a couple of times but once you will get started, your partnership will have clarity and all will be spelled out in writing
In my experience, attorneys are the least educated expensive part in a transaction. Especially if you retain them early on.
I usually have the attorneys hash it out and they always reach a reasonable compromise so long as you and your partner stay in open and respectful communication regarding the key points in the agreement
Appreciate the insight! My business partner and I are both very direct, no bs type so it’s been great to work together up to now. We’re both very open and considerate of each other’s position.
Just was not expecting the LLC attorney, who also is a real estate broker, and my attorney, who specialises in real estate and commercial law, to have such different advices.