Partnership with family - Do I need to create an LLC?

Question

HI BP Community - I'm a newbie investor and trying to strategize a few different ways to purchase my first few properties. I have some funds I can use as a down payment for a SFH but to get into a multi family or purchase multiple SFHs I was thinking of working with my dad to get additional cash for more down payments and potentially also co-sign with me on loans if needed. I've seen people mention that it's a good idea to create an LLC when you are in a partnership with someone on a property and wondering whether this would be a good idea or whether it would really be needed for a family partnership or if a partnership contract is sufficient. Pros/Cons? Any advice would be appreciated!

Landon Bleau · Answer

Katie, the most recent episode of the BP Rookie podcast was all about partnerships, it will definitely be worth your time if you're considering a partnership.  As for the LLC, though most would say it is a good idea, it is not necessary.  Many just get large umbrella policies to protect themselves.

Katie Panzica · Answer

@Landon Bleau thanks for the recommendation.  I listen to that podcast but am not caught up.  I’ll check it out!

Ben Riechmann · Answer

I agree with Landon statement as LLC's do not protect as well as they once did. You will want to have an umbrella policy for all your investments anyway and will protect you from a whole lot of things.  I know non-investors that get them to protect themselves from sue happy people and were glad they did.  I am not saying not to get a LLC, but make sure to get an strong Umbrella as that may help you more.