All Forum Posts by: Terry Portier

@Bill Gulley

When I first set mine up and my contract it had little assets in it so right or wrong I felt comfortable DIY, that and since I found the subject matter very interesting I disillusion ally convinced myself I could handle this lol, that coupled with I just don't trust lawyers and some don't know what they are talking about either.

Find a "good' one is going to be a challenge, there are so many areas of law, the entity, contracts, bankruptcy, real estate, construction and labor if you rehab, probate, etc...but I will take your advice and not try and write my own OA.

As far as I know, no lawyer will guarantee your operating agreement, contracts, etc are legally sound, and as you pointed out laws change, so seems there is a need to continually hire an attorney for an update. But I would agree it should be better than DIY or one of the internet cookie cutter methods. Only thing I know can be done to an incompetent attorney is file a complaint with the states bar association, if it is not too late and you have loss your shirt in court.

BTW: Our state embeds updates to federal law in our state statues. The statues on our legislative website are not maintained and there is a disclaimer to that affect.

There is a recent blog by Ali on LLCs that got a lot of responses, how they relate to contracts, insurance, etc, you might want check out. I did a ton of research before I made a decision to the point I at least knew what questions to ask. If you go to your states dept of revenue, mine list some great resources to get help like fed Small Business Admin (SBA) , and your state may have one. There is good legal advice out there for free. I got into a lot of good discussions on BP, there are professionals out here that know what they are talking about, just as many that don’t, and ones with experience. Some, not all, things vary by state. There was a TX attorney that chimed in on Alis thread about how he set up series LLC, how TX considers them separate entities. My state also has approved them and treats them the same way, so I went and read the statue on my states legislative website, easy to set up, but they are hard to insure here, which I feel strongly is part of setting up an LLC, to fully understand and insure it with a Commercial Liability Policy. The other big one to find out is if you state allows foreclosure on a member’s interest, not all do, and check out some case laws in your state to consider too. LLCs are a relatively new entity, as related to RE, contracts, probate, can get quite complex. Here is a good article, http://www.johntreed.com/entity.html. Attorney’s, courts, are still interpreting statues by case law, you can look at some of these on the internet.

Some states like Delaware, Wyoming, Nevada, are corporate tax haven with a long history of case laws that people flock to as foreign entities. Some states still require you to register in the state you conduct business in and maintain a residence or registered agent.

After a year in operation with a high exposure level to personal injury I am still learning. Recently I discovered that the wording on my contract did not allow collect up to 40% attorney fees, also that I need to sign my contracts with my corporate title. Knowing how to structure your contracts would be an area to seek an attorney that has experience in court with your business model.

I set mine up on my own, that part is easy, and there is nothing to challenge there in court other than not staying active. When I filed I get my Articles of Organization, if I am SP with no employees I don’t have to register with the dept of rev for taxes it happens when I file. If I am a general partnership like you I do because my states wants to know the type of corporate business I will be conducting, if I will have employee withholdings, sales tax, liquor, tobacco, etc . So it is a little more involved, this can take up to several weeks and you cannot conduct business until you are a registered business with a certificate of registration in hand. That is why I asked if you were SP.

A general partnership has better legal protection because more members have an interest, you can sell interest, S or C has public stock/shares an LLC does not. I like LLCs since I am able to structure them as I wish, where an S or C has stricter structure legally. I also like the tax flexibility of the sub chapters, SP, S, or C I can elect. I am in the process of writing my own Operating Agreement since we are a family LLC too, so I do not have a stranger as a partner, if I did I go to an attorney. The Operating agreement here does not get filled with my Secretary of State and stays in my file.

Sorry about the book hope it helps, I been revisiting my LLC with respect to expanding divisionally and with employees , a possible series LLC, my contracts, probate, retirement, etc, they do require attention and continuous maintenance, can get complex. I may be approaching a point soon where I may be over my head needing an attorney.

Good luck!

Oh, I see....what a nightmare.

You should stop and read alot about LLCs before asking this question, tax benefits are the last reason you need an LLC. You need to state whether you are SP or a have partner before this question can even be answered accurately. Once you study them you will see they provide asset protection regardless of if you whole sale, flip, renovate if managed properly and understood.

Brain, wow, interesting! From the article you posted sand is an acceptable alternative to removing correct? Depending on your local codes? What about a soil test is there one, or how are the plants, etc doing?

Yes much like a LLC but only the money invested in the S Corporation by its shareholders is at risk, barring extreme circumstances personal assets are usually protected, as they are with LLCs. An LLC is flexable in the operating agreement you can pretty much structure it as you want where you are bound by striker rules in a S. All S-Corps have hard and fast rules for how to remain compliant, who can vote on corporate practices, etc. These rules give shareholders and owners a real, clear path to follow, and that path is familiar

If you are going public or selling shares like the big fish S or C is the way to go, for most small business REIs LLCs. LLCs can not sell stock only interest, S and C can.

Well I take a different stance on DOS. If you have a contract with a bank that prohibits taking title out of your name and transferring it to an LLC and you do it, a court of law (if you ever end up there) can see the transfer as null and void per contract and treat you as a sole proprietor.

A legal entity such as a LLC is only valid to the extent it is managed especially contractually. Some may find that ridiculous, but there have been cases where the member of the LLC did not sign contracts with their LLC title and were found to be acting as SP. You can be assured that a prosecuting attorney first effort will be to tear the LLC down, all the cases I have read online that is what happen, or case law had to interpret statues.

So check with your attorney, I would play by the book. You took the time and expense to hire an attorney to set it up properly, to follow will be your ability to manage it properly and that will be based on knowledge.

I also take a different stance on the definition of assets to include avoiding judgments as a SP when conducting a business, protecting yourself against legal fees, both of which can produce garnishments against any form of income you make for the rest of your life, not just real property.

What needs to be compared here is legal protection against an insured LLC vs. SP, I think for the most part the LLC wins although there are some potential hick-ups if you don't know how to manage them.

Regardless of what protection you choose, at the end of the day, the best defense against law suits is to make sure you understand the surrounding laws to your business model, that you pay your debts, are not negligence; knowledge is the best legal defense and asset protection out there.

First off it is impossible to compare a legal entity such as a LLC to an insurance policy that is like comparing apples to oranges.

Why don’t you ask the CU what they mean by ‘qualify’ and ask someone that knows what they are talking about that can show a CU policy in writting? Do they want a copy of your Articles of Organization? You’re EIN? Your state tax ID or state tax clearance letter stating you are in good standing with the state, an Operating Agreement, a list of members and titles, you are active, etc.?

It is very rare that an LLC alone will qualify for a loan, even the big fish with huge assets have to personally guarantee them. The reason is piercing the corporate veil is much more difficult than a personally backed loan. Some have had success forfeiting their foreclosure rights instead of personal backing.

If in fact they want the LLC to qualify financially then find another bank to refi if you can because that is not common. Or look at your loan papers or ask them to show where in writing it states that a QCD transfer triggers a DOS which I doubt if it did they ever call you on it.

I think it's funnier when you don't have a porta potty :)

Well since I’ve been in deep thought on putting rentals in LLCs and asset protection past few days on Ali’s blog (thanks Ali) I would propose the first thing to do would be to identify and rectify any mechanical or electrical hazard issues. We do a lot of work for property managers and have seen it all. We just completed a gut fire restoration job. We installed hard wired smoke detectors so that you don’t rely on tenants to replace batteries, fire extinguishers, CO2. The place we just did there was a lot of carbon build up in the furnace, filter looked like it had not been replaced in a year, more fire hazards. There were no GFIs by water since they were grandfathered in. I have seen indoor romex and non-gfi outlets outside subjected to weather and the list goes on and on. A lot of people are under the false impression that management companies assume the liability here, or that their umbrella policy will kick in for their neglect or lack of construction knowledge. A good idea would be to get to know a good licensed and liability insured GC, let them bring experts like electrical, plumbing, HVAC for inspection. Make sure the GC uses only subs with liability and workers comp insurance, and read the GCs contact with you. They should be up to date on new building codes.

Next I’d look for ways to reduce maintenance; some don’t put bedroom closets in, dishwashers, carpet, garbage disposals, add gutter guards, etc, depending on the property.