LLC when first starting out, do it or wait?

[Steven Devoe]

Hey everyone, fairly new here. I have read more or less every real estate book I can get my hands on here in the last 3 months or so. A friend of mine and I are beginning to seriously consider buying real estate investments as a partnership here in the near future and I have been wondering if it is worth the time to set up an LLC already with only one property? We would be equal stakeholders and I seem more committed than him so I think an LLC would be a good idea in the event that one of decides we no longer want to continue. I live in Illinois so the upfront costs of an LLC are pretty high like 500 to 600 in filing fees plus whatever legal costs are incurred in drafting the agreement and operating agreement, and 250 yearly maintenance (have to pad the corrupt politicians salaries somehow).

Another question I have is what benefit does an operating agreement serve? It isn't required in Illinois.

What about if my partner backs out? Would you still LLC or leave it to later?

[Account Closed]

Yes you need a LLC. Just to protect yourself, not just from your partner, but say a contractor gets hurt, if the LLC isn't filed correctly with an accurate Operating Agreement, you are LIABLE.

Further, the key to an operating agreement is to clearly detail ownership, responsibilities, how to handle the bookkeeping, and also should detail how to remove a partner should one person want to leave.

These are absolutely key. This is a business, not a hobby. You should treat it as such from Day One.