All Forum Posts by: Michael Plaks

@Paul Whitford

LLC is not your first concern. Before talking about an LLC, you need to determine the economic substance of the arrangement. Who will own the property, including the rights to lease, improve and resell? Who will bear the responsibilities, operational and financial? Who will be entitled to the economic (as opposed to tax) benefits? Who will suffer from the economic (as opposed to tax) losses?

Depending on your decisions, you might have your parents in the lender's position or an equity partner position. Yourself - you can be an equity partner or a contractor hired by your parents to acquire and manage their asset. 

Until these questions are clearly answered, you cannot move forward with anything, LLC included.

I have been practicing real estate taxation in Texas for over 20 years, and I do not understand what your attorney means by an association being an alternative to a partnership. Maybe he said a corporation?

No, I did not. I do not pay much attention to proposals that are DOA. But yes, these stipulations are something. 

The proposal includes a clause to establish a fund to reimburse landlords and lenders...

The knowledge of the Anderson founders, Clint and Toby, is exceptional, and they share it generously. Thumbs up! But like it was mentioned earlier, remember that you will not have direct access to these guys, at least not without paying a huge premium for such access. This should make sense to everybody.

Now, one issue I have is their recent statement that caught my attention as I was listening to their webinar on the new SBA loans, PPP and EIDL. Anderson offers (or at least used to, before these SBA programs ran out of money) packages to assist businesses with evaluating their eligibility and applying for these loans. So far so good, many firms do that.

However, they said that, in anticipation of the demand for these new services, Anderson hired more people. In other words, the employees helping you with these brand new, highly complicated and, for some, survival-level projects are likely to be recently hired employees, without sufficient training and experience. I'd be concerned. Makes me think - is it also the case for their other services?

@Cameron Jernigan

Remember that whatever you draft, it is a piece of paper in the end. If you partner with someone rotten (or desperate), you can get screwed no matter what the contract says. Even if you later take this contract to the small claims court, all you might get is a judgement, not your money, and it will remain up to you to collect. And good luck with that.

So before worrying about the contract, make sure that your JV partner has a reputation of being trustworthy.

@Ivan Brito

Almost everyone responding to your question earlier immediately made huge assumptions. For example, they assumed that you're buying a rental (buy and hold) property and that all partners will have equal contributions of money and participation. 

This may or may not be the case. So in reality the starting point is to clarify what it is you're building. What is your -investment strategy aka business plan? What are the respective contributions and responsibilities of partners? How are you planning to fund the operation? How are you planning to share costs, profits, losses and responsibilities?

Doing anything (except drinking, and even that is debatable) with multiple people is ripe for misunderstanding, friction, conflicts and outright disaster. I have stories I could be telling for weeks. Thread carefully.

@Todd Groom

My colleagues who chimed in earlier explained that it is not our job to audit/verify everything that our clients claim. It is, however, our responsibility to do some due diligence and ensure that the tax returns we prepare are at least reasonable.

It is possible that the statements or numbers provided by your friend were inconsistent or otherwise suspicious. No offense, I do not know your friend. However, I have met many investors whose data or statements did not sound right to me, and worse, upon further questioning, they kept changing. I did not accept them as clients.

In other words, if your friend says: here is my spreadsheet where I diligently kept track of my income and expenses, and the numbers make sense, I will take it. If he sits empty-handed in my office, looks at my ceiling and dictates his "numbers" from there and keeps changing them - I will pass.

@Greg O'Brien provided a great answer as to how it is supposed to be filed under the new rules. To your question about updating an existing filing: the answer is - SOL, most likely. If your application is in its pre-approval stages, then possibly your bank will allow you to adjust the numbers. We adjusted numbers on some of the applications when banks requested supporting documentation. They have not been approved yet though, so we shall see.

But if your application has already been approved - too bad. Or maybe not so bad, considering the current lack of funding for the program. At least you might get something, while many won't get anything.

Now, forgiveness that Greg mentioned - it is totally unclear. To say that the current rules are confusing is an understatement. It is very likely that more guidance will be issued before it is time to apply for forgiveness. And it is 100% certain that no guidance will be able to answer all the questions we have. Application is a mess, I agree with you, and forgiveness will be a bigger mess, at least for the self-employed.  I predict that a lot of self-employed PPP loans will not be forgiven.

Nope. It was that way many years ago. Not anymore. No reason to fear an audit because of home office.

And this silly self-rent trick does not work.