Looking for Lawyer in Dallas TX to start LLC

Dallas, TX · Member since 2017 · 5 posts · 0 votes

Hi Everyone,

I am new to the market, I have spent the past year soaking in everything I can.

I have found a partner that has access to a large amount of capital. We are looking to create a lawyer and get an official business started with a 50/50 split. Does anyone have any advice on the most efficient way to go about this? Also recommend a lawyer in the Dallas area?

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Joseph B. Davisson

Dallas, TX · Member since 2015 · 58 posts · 55 votes

WIll the investor money be borrowed, or is the investor taking a membership interest in the entity owning the property, or a fee simple interest in the property? Furthermore, will the profits from the operations be rolled into future transactions or will they be disbursed? You will need to discuss your plan with your CPA and discuss the anticipated tax consequences of the structure of your venture in light of the types of transactions you anticipate.

If this venture is for investment purposes, and you are not living off the profits, then consider a structure that will allow you to defer the capital gains through a 1031 exchange. Ask you CPA about the consequences of forming an entity wherein you are each own an equity interest, and the ability of the entity to defer capital gains, and prohibitions on exchanging your interest in the entity for real property and expecting a capital gains deferral. You and the investor may consider holding you interests as tenants in common (TIC) if you plan to disburse or take your capital gains upon the sale and each do with your portion as you please (whether that be a 1031 or not). Some form of management agreement stating the terms of how the property is managed, should accompany the TIC agreement if you go this direction.

Keep it simple to start and get a deal or two under your belt with your investor before you "get married" with a grand plan. Regardless, have an exit if the relationship does not work out. A push/pull buy sell agreement is a good idea of these types of business arrangements.

Also, keep in mind that you and your investor should not be represented by the same attorney. You each have competing interests. 50/50 sounds good in theory, but are you equally splitting profits or control? Furthermore, how is liability split?

Do some deals and then learn what works your you and the investor. Learn from these deals and work this experience into an ongoing agreement. Consider borrowing money from the investor and having the loan (on which interest accrues) secured by a deed of trust and then having a separate percentage of profits agreement in which you both share in the profits. This way, owner of the property maintains control, lender is secured, and if there are profits, owner pays the interest and owner and lender split the profits.

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Bob Okenwa
Real Estate Agent/Investor · Peoria, AZ · Member since 2016 · 2k+ posts · 2k+ votes
9y
You're going to want a lawyer to draft the operating agreement, but you can form the LLC yourself using the Secretary of State website. If you need a rundown on how it's done, check out LLC University for a full walkthrough. Be aware there is a $300 filing fee. https://www.llcuniversity.com/texas-llc/
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Joseph B. Davisson
Dallas, TX · Member since 2015 · 58 posts · 55 votes
9y
WIll the investor money be borrowed, or is the investor taking a membership interest in the entity owning the property, or a fee simple interest in the property? Furthermore, will the profits from the operations be rolled into future transactions or will they be disbursed? You will need to discuss your plan with your CPA and discuss the anticipated tax consequences of the structure of your venture in light of the types of transactions you anticipate.
If this venture is for investment purposes, and you are not living off the profits, then consider a structure that will allow you to defer the capital gains through a 1031 exchange. Ask you CPA about the consequences of forming an entity wherein you are each own an equity interest, and the ability of the entity to defer capital gains, and prohibitions on exchanging your interest in the entity for real property and expecting a capital gains deferral. You and the investor may consider holding you interests as tenants in common (TIC) if you plan to disburse or take your capital gains upon the sale and each do with your portion as you please (whether that be a 1031 or not). Some form of management agreement stating the terms of how the property is managed, should accompany the TIC agreement if you go this direction.
Keep it simple to start and get a deal or two under your belt with your investor before you "get married" with a grand plan. Regardless, have an exit if the relationship does not work out. A push/pull buy sell agreement is a good idea of these types of business arrangements.
Also, keep in mind that you and your investor should not be represented by the same attorney. You each have competing interests. 50/50 sounds good in theory, but are you equally splitting profits or control? Furthermore, how is liability split?
Do some deals and then learn what works your you and the investor. Learn from these deals and work this experience into an ongoing agreement. Consider borrowing money from the investor and having the loan (on which interest accrues) secured by a deed of trust and then having a separate percentage of profits agreement in which you both share in the profits. This way, owner of the property maintains control, lender is secured, and if there are profits, owner pays the interest and owner and lender split the profits.
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Bill ExeterBusiness Member
1031 Exchange Qualified Intermediary · San Diego, CA · Member since 2008 · 1k+ posts · 1k+ votes
9y
Hi @Calvin Brown,
You and your partner need to address your exit strategy first. Setting up a two (2) member limited liability company generally creates a partnership for income tax purposes, which can complicate exit strategies, including structuring 1031 Exchange transactions. You should discuss potential exit strategies with your partner and with your tax accountant before you jump into any transaction and/or legal entity.
I agree with @Joseph B. Davisson in that you will likely want to keep it simple while you get started.
Exeter 1031 Exchange Services, LLC and Exeter Trust Company4.726 Reviews
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Calvin Brown
OP
Dallas, TX · Member since 2017 · 5 posts · 0 votes
9y
Hi @Joseph B. Davisson and @Bill Exeterthanks very much for your response.
Currently between the two of us we have a substantial amount of capital saved. My partner will be taking a membership interest. We will both be fully vested in the first property (looking for 16-32 units) and will split roles/responsibility on managing the complex. Our exit is to take our profits from our first deal and roll them into larger units.
It sounds like we should both see a CPA as a first step to discuss options? Or create a 2 member LLC?
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Bill ExeterBusiness Member
1031 Exchange Qualified Intermediary · San Diego, CA · Member since 2008 · 1k+ posts · 1k+ votes
9y
Hi @Calvin Brown,
Yes, I would highly recommend that both of you with your respective tax advisors before proceeding down either path. Careful planning can save you lots of headaches in the future.
Structuring a multi-member limited liability company is not a problem as long as you both want to stay together, 1031 exchange together and reinvest together. But, it can be a major problem you both want to go different directions.
Exeter 1031 Exchange Services, LLC and Exeter Trust Company4.726 Reviews
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Calvin Brown
OP
Dallas, TX · Member since 2017 · 5 posts · 0 votes
9y
@Joseph B. Davisson do you have any referrals for RealEstate focused CPAs in the Dallas area?
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Mark Allen
Real Estate Investor/Broker · Irving, TX · Member since 2015 · 520 posts · 263 votes
9y
LegalZoom is the cheapest if you're going to have someone do it. $69 + state filing fees I think.
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