How to legally structure a wholesaling team?

[Maria Villamar]

My friend wants to join a real estate agent in Philadelphia, PA who also does wholesaling but isn't sure on whether or not to do "business as" herself to report income from wholesaling or if she should request the agent to create an LLC and then become an "employee" although since they are building the business together they are business partners.

In that case, should they create a partnership? How should they report income on property assignments?

Friend does not have a real estate license, and they are about to get their first deal under contract. Thanks a lot for your help! 

[Chris K.]

@Maria Villamar

I don't want to oversimplify it, but Pennsylvania allows a non-broker to own a real-estate brokerage as long as the brokerage can meet certain requirements (e.g. having a broker of record). Now I don't know if this real-estate agent has enough credentials to become a broker. But if so, the agent could get his or her broker license and they could theoretically create a brokerage together. 

A few other items to note: 

• I'm pretty sure there are rules against brokers and salesperson sharing fees with a non-broker/salesperson in many contexts. Double check but I'm pretty sure.  The brokerage format should take care of this scenario but you need some planning there. 

• Remember that assignment of an agreement of sale is a taxable event in Pennsylvania. Thus the wholesaler maybe in a situation where she needs to pay double realty transfer taxes.

Disclaimer: While I’m an attorney licensed to practice in PA, I’m not your attorney. What I wrote above does not create an attorney/client relationship between us. I wrote the above for informational purposes. Do not rely on it for legal advice. Always consult with your attorney before you rely on the above information.