LLC question regarding partnership

[Dan Graves]

Hello everyone, I'm a newbie to commercial investment but have an opportunity that I may want to take advantage of. A trusted friend and I are talking about purchasing a commercial property as partners. My question is in regards to how LLC's are typically structured when there's more than one "owner" of the property. He already has an LLC and wants to add this property to it, but he wants to include me under contract stating the percentage of ownership, etc. I would not be listed as a co-owner of the LLC. I'm concerned more about other implications... taxes, etc. but I really don't understand much at all. I assumed we'd create a new LLC for this property alone and we'd both be co-owners. My simple mind needs to keep things logical to understand. 8-)

Dan

Sacramento, CA

[Chris Martin]

If he "adds this property to it" and the "it" is his LLC, then as @Jonathan Twombly points out this would be a deeded interest between you and his LLC. Personally, I wouldn't structure a deal this way. Unless you are buying some really low end commercial property where $800 is significant... but in that scenario I probably wouldn't do the deal anyway. 

The cleaner method, IMO, is a SPE (Special Purpose Entity) LLC where his LLC "owns" 50% and you "own" 50%. Two members, one a person, one an entity. Your K-1 reflects your membership interest in the SPE and has nothing to do with "his" existing LLC. My 2 cents.