Wholesaling with LLC?

Question

Hi all - when getting a property under contract for a wholesale deal, is it permissible to put "my llc company name" "and/or assigns" etc.... and then have the end buyer sign the assignment contract?

In other words can I get properties under contract/assign them using my LLC without actually selling the LLC? Or would it be better to set up an s/c-corp? I'm looking for a way to not have my name personally on the P&S agreement, while also not having to sell the entity every single time I complete a transaction.

I obviously have plans to sit down with an attorney, but figured I would gauge the forums as well. Thanks in advance.

Jason Timmerman · Answer

Nick, I think you are getting very confused about your membership relationship to the LLC.  When the LLC purchases a property from a seller, you are shielded personally.  You are acting as a member of the LLC when you sign, you are not signing personally.  You cannot sign personally unless your name is listed as the individual buyer.  As long as the LLC is listed as the buyer, and you are a member of the LLC, you are fine legally.

Account Closed · Answer

@Nick Brown Piercing the Veil laws differ between States. If you want to walk a fine line along the inside edge of the law then you need legal advice from a NJ attorney. Someone has to sign on behalf of LLCs. Who signs depends, in some states, on how the LLC is set up; as a manager-managed or member-managed LLC, for example, as we have in WA. Not all states have the distinction. The authority to sign on behalf of an LLC carries some legal responsibility, but does not make one liable for actions above and beyond the LLC even if one is the manager or member. I fully agree with @Ned Carey that any signature on behalf of an LLC, Corporation (any legal entity) should include someone's title / legal authority to represent that entity.

I am not sure what you are trying to accomplish with this assignment. If the LLC purchases property, and then sells the property, you do not sell the LLC. The LLC as a legal entity is selling one of its assets.

Ned Carey · Answer

Technically if the contract does not specifically say it's can't be assigned then, the contract can be assigned. If the contract says it cannot be assigned and you still write and/or assigns you are getting into a very technical legal argument, which would vary by state, which you probably won't find a definitive answer and may be subject to the whims of a judge.

Basically assuming the contract is assignable you can use the company name and assign that contract. However who is going to sign on behalf of your company? A human will have to sign the contract.

Stephen Chatto · Answer

Not an attorney.   We usually use our Business Name on the Purchase and sale contracts.   We sometimes use a LAND TRUST as the buyer, which allows for a LOT of flexibility.  If using the state contract we cross out the part about it being not assignable, and put in the other comments that it is.   I like the Land Trust when dealing with short sales and Bank Owned.  Just my non-legal opinion.

:)

Good Luck.

Chatto

Jefferson Gan · Answer

@Nick Brown Just be cautious in New Jersey, the standard Realtor form has the Not Assignable clause in it. But if you have your own contract, if there is nothing mentioned about assignment, then by default the contract is assignable. When putting an LLC in the contract, also better put a LLC that is about to be built instead of your main company's LLC so just in case you cannot assign, you can just sell the LLC as one exit strategy. You can check Christopher Goodson he is an investor friendly attorney that I have used. He is an investor as well so he knows a lot of stuff surrounding contracts.

Nick Brown · Answer

Thanks Account Closed. I will be assigning the P&S agreement to an end cash buyer before closing. I will not be purchasing the property. I definitely will be consulting an NJ attorney. The reason for the post is that if I get a property under contract and for whatever reason I am unable to find an end buyer, etc. and have to back out of the deal, I don't want to be personally liable for anything in the event the seller gets angry and files a suit.

Nick Brown · Answer

Thanks @Stephen Chatto  Josh C.. So normally, in a wholesale transaction, you will use your LLC on the P&S agreement, then sign by you personally  (giving an appropriate EMD), and then you will assign to an end buyer. And because you gave a real EMD and were transparent with the seller in the beginning, you are able to sleep at night :)

Stephen Chatto · Answer

Great Point...   I find it amazing when people argue that they only need this $10 Earnest Money Deposit.    Use an EMD that Makes Sense.

Stephen Chatto · Answer

@Nick Brown - I would sign as member of the LLC, not personally.  Be careful with your transparency.  If your intent is ONLY to assign the deal, then you are treading on acting like as a realtor without a license.   Consult a local attorney.  Check out this Video Interview with Attorney Christopher Goodson.  Here is a link to the Video

Wholesaling with LLC?

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