All Forum Posts by: Sean Morrison

From the buy-sell agreements I've done for buy-hold companies, the valuation is typically based on the current market value of the property minus any debts. Importantly, these companies also buy insurance to cover the cost of buying out the exiting partner. Cash flow isn't a great valuation since the value of the equity will generally be much higher than the NPV of cash flow at any given time.

It's all a bit overwhelming, but you should really focus on purchasing a property if that's what the business will ultimately do.

The risk of buying the property in your name and then transferring to the LLC is that the lender may trigger the "due on sale" clause. However, if your credit union is the lender and they say that's fine, then it's fine so long as they don't sell your note before you do that. Get them to confirm in writing that you can do it. And keep separate bank accounts and books regardless of whether it's an LLC, your name, or anything else.

You should really consider forming a Florida LLC to own the property. Foreign LLCs create all kinds of problems in the courts, who much prefer local LLCs.

There's no requirement that you have a business entity, but that could help with liability if a problem arises. Make sure they qualify as contractors, not employees or you'll have all sorts of issues. If you pay them more than $600 this year, you'll need to get a W9 from them so you can file 1099's next year. And if you're paying by commission, you should probably get a contract outlining how they're paid.

The LLC does not give tax advantages. After all, it's a pass through entity, which means the IRS disregards it completely. It's meant to offer liability protections if you don't have enough insurance by segregating the property from the rest of your personal assets. But to work, the LLC has to own the property, not you. And that will restrict your funding opportunities and you may pay a bit more in interest to make it happen.

Do a consult. Most simple deals will not need one. But if you get into creative financing, larger deals than basic SFH, or have partners, then you will definitely want to have one at the ready.

@Jason Perez is right. In my experience, it costs more time to review a contract and make it right than it does to have the attorney simply modify their own work and deliver it. You should get a flat fee for something like that, unless you have significant changes to make.

I think land trusts are very often misunderstood. They can provide some modicum of anonymity, and are great tools for estate planning, but they aren't designed for asset protection. Using multiple LLCs is a great way to segregate the properties from one liability spilling over and having you lose other properties. But they only protect you after your insurance has reached its cap. So if you have great insurance, you may never need the LLC. That's why you're hearing so many answers on this. How much liability do you expect? How much risk are you willing to accept? And how much are you willing to spend on managing the risk that remains? These are the things you'll want to discuss sitting down with an attorney.

I don't know anything about Legal in a Box, but if you're trying to do more than a plain single-member LLC with stuff you find online, you will be going down a dangerous road. Thing is, you won't ever know it until something happens and it all falls apart. What you're describing needs an attorney, not a Google search.