Pooling Investors Money

[Connor Williams]

Just a quick question, hopefully to get a quick and simple response. I've been looking all over and not sure if it exists or not, but where are you suppose to put money to make everyone in the transaction feel safe. For example I have two people that want to give me money to put toward REI and will be using some of my capital as well. Where does one put that so everyone feels comfortable with handing over 20k? Thanks :)

[Bill Gulley]

Form an LLC with the 3 members, 3 or less is exempt from SEC offerings issues as a partnership, more than 3 you get nailed. Check state security laws as they may be different, but 3 is pretty common.

Put the money in a company bank account, about as safe as you'll get with that amount.

The Operating Agreement forms the LLC defines how business is to be conducted, who has signature authority over bank accounts, the rights and obligations of members and management issues. Each member has their own capital account that can be at their discretion for investing, this is how funds are segregated and accounted for, the fact that it's in one account is irrelevant.

You need to see an attorney, absolutely see an attorney. It's not just RE knowledge you'll be seeking but general business aspects as well. Also, just as important, see an accountant, you needs to make a tax election at the time you set up the company.

Might search the forums here as well for more insight to setting up an entity, in this past month I gave one of my long ranting type posts to the steps of starting up. Sorry, I don't keep track of them. Might search for "LLC EIN Escrow" those key words should bring it up, I hope...LOL :)