Getting Started - Partnership Structure

[Alex Pollock]

Looking for some input on sequence of steps to get started here. A friend and I intend to start building a rental portfolio. We intend to split everything down the middle financially. So, to keep things clean we'd like to form an LLC. I've talked to a local bank who will issues loans to a newly formed LLC, so long as we co-sign as individuals. My question is then this: Would it be wise to get an accountant or attorney involved in setting up the LLC, and to just have as a resource for any issues down the road (taxes, disputes, etc.)? If only one of those two is really important, which one any why? We have a realtor who is a family member already to work with, we've probably found a lender who will work with us, so this is the only other piece of that initial puzzle I'm not sure how to address.

And for those of you who might advise against an LLC, please chime in and let me know why. Thanks!

[Brian Burke]

Alex P., Karen Margrave gave you good advice above. You absolutely need an attorney and a CPA to advise you. The attorney will draft the operating agreement and will think of things that you wouldn't even have thought of until the unthinkable happens and you are stuck. The CPA will work with the attorney to ensure that the financial provisions of the operating agreement not only fit your intent, but fit your tax and income situation.

Normally I advise against the cost/complexity layers added by forming an entity for simple single-family rental property ownership, but in this case you do need the entity. When you are partnering with someone else, title in a seperate entity protects your interest in the property against liens lodged against your partner as a result of his outside pursuits or personal blunders.