Partnership agreement

[Pat Lione]

I am forming a 50/50 partnership LLC for flipping rehabbed properties. 1st question should I use myself or an llc for my 50% membership? 2nd question is taxes. Do we elect to do our own taxes (each member) at the end of the year or tax the partnership llc. Thanks

[Bill Gulley]

Hi, you said flip properties, so I assume this is not a one time shot. I suggest you form an LLC. Put some thought into it and get advice, many here have them. Your taxes will flow through the LLC from your K-1 to your 1040, pretty easy as business taxation goes. In your Operating Agreement (governs your operations in the LLC) address a buy-sell agreement so that either one of you can buy out the interest of the other, you can make it mutually acceptable. If you bring in spouses (like 4 people) you'll have an easier time with the management by the members issues and liability issues as well. You will need to keep "minutes" of meetings of what you authorize someone to do, the more detailed the better and also I suggest having a "cut-off" limitation to any memeber being able to conduct business or purchase items, without approval by all memebers, like buying stuff up to $100.00 without special consent...what ever works, but beware, authorizing someone to buy building materials for example for a large amount (like a percentage of your line of credit or capital account) may infer more responsibility with that one memebr and effect how management is viewed or liability situations, so keep cut-offs reasonable for day to day stuff and authorize major tranbsactions. Good luck, Bill.