Getting ready to begin acquiring rentals with a partner (brother in law) and I was looking for advice on who I should engage (lawyer, accountant, etc.) that can help me nail down how the business should look to protect everyone involved. any recommendations on individuals you have had success with ?
@Rich Thoms I own a 20 unit apartment complex in South Bend, Indiana with a partner. The first step for us was to get the operating agreement for our LLC drafted with our attorney. This means that your lawyer is definitely your first stop in the process. We didn't do this until we had a property identified and under contract, though. You can waste a lot of time and money on entity formation, and you want to make sure you actually will have real estate to hold in the entity before you go to the trouble of forming it.
An attorney can draft an operating agreement that spells how the partnership will work but it's up to you and your partner to agree on the basic terms in order to tell your attorney what to draft. A good CPA can also help determine the proper structure for taxes and may even have some insight on how to structure your entity. It should be a team effort between the principals, your attorney and CPA. I would get them in the same room or a conference call to brainstorm what will work for you. Start with ownership % based on contribution amounts, then who is going to do what for the project and if someone is doing more of the work should they be compensated for that in either a fee, equity, etc. There is no right or wrong way to structure a deal, but there are better and worse ways!
Creating an entity is the easy part (in Indiana I can create and register an LLC and register an EIN online in about 10 min combined). I had my attorney draft a blank operating agreement that can be used for each single purpose entity I create to invest in a property. Each of those entities are owned by a single member, which is my companies parent entity (LLC) which has a different, more detailed operating agreement that lays out how the company operates, voting, control, management, contributions, distributions, sale/liquidation, taxes, etc. That's what works for my situation, yours may be vastly different.
*This is not legal or financial advice, consult an attourne and/or CPA.*
thank you both very much. I am talking to my accountant who happens to be a lawyer now and he happens to know way more about this than I thought he did. turns out I already have this asset on my team!
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