To LLC or to not LLC

[Brendan Barry]

My buddy and I are going in on a deal together (first one for both of us). Should we form an LLC? Do we need to? What are our options! I’m grateful for any advice you may have! Brendan

[Brian Schmelzlen]

Originally posted by @Brendan Barry:

My buddy and I are going in on a deal together (first one for both of us). Should we form an LLC? Do we need to? What are our options! I’m grateful for any advice you may have! Brendan

If you have a partner, always form an entity.  If you have a "partner" and are operating with a profit motive, by default you are a general partnership.  You never want to be in a general partnership because it means that you are liable for anything that your partner does.

If your partner gets into a car accident while driving towards your deal, you can be sued personally.  If your partner does anything that he/she could be liable for and it can in any way be tied to the partnership, if you have the deeper pockets you will be the one sued.

You are not really saving much by not forming an LLC. You are still going to have to file a partnership tax return.

If you are operating on your own, insurance might make sense instead of an LLC (especially if you are only talking about a handful of deals). When you are doing deals with a partner, it is (as a general rule) a very good idea to be set up as an entity.