How Do My Partner and I Both Have Visibility To Profits/Expenses?

Question

My investing partner and I both have our own separate LLCs, but we want to partner on a deal 50/50 and both have visibility to the all profits/costs/expenses in the bank account. Is it best to create a new LLC/LLP for this deal to have that visibility or is there an alternative? We have a partnership agreement in place, but in order for us to both have visibility to the bank account we need an EIN.

Any suggestions would be greatly appreciated!

Sam Alomari · Answer

Hi @Lauren Gilliard

Yes I prefer a new LLC. Some people do a separate LLC per property for maximum protection. In my opinion, it's not bad if you don't mind the added headache.

Few other options are a Trust, LLP, LLC owned by your LLC and your Partner's LLC.

I strongly recommend that you consult with a lawyer. Many smart lawyers out there can help you protect your investment and pick the right entity.

Lauren Gilliard · Answer

Thanks for your help!!!

Basit Siddiqi · Answer

@Lauren GilliardYou likely both want to create a new LLC. You mentioned that both of you have LLC's. If the LLC's are single member LLC's and in gonna be in the same business as the newly formed LLC, I would have those 2 LLC's be the members of the newly formed LLC.It is also adviseable that the new LLC should have its own bank account.That in it of itself wont tell you what teh profits/costs/expenses of the business are. You will need to categorize the deposits/withdrawals as income/profits/assets/liabilities/equity to give you a full picture.you can do this yourself or you can hire an accountant to do this for you.

Michael Plaks · Answer

@Lauren Gilliard

With or without LLCs, 50/50 partnership is the worst option to do a deal together. Yes, it is the simplest to propose, but the worst in terms of potential problems. (Think marriage.) If at all possible - make one of you run the deal 100% thru your respective business, with the other partner being either a lender or a contractor. Neither prevents you from splitting profits 50/50, but it prevents dozens of other problems.

If this is impossible due to egos, trust and whatnot - then try 60/40 or 51/49 partnership. Only if it is absolutely unavoidable to go 50/50 - then you might have to accept it. If both of you have ownership interest, then you need to form a separate LLC. I suggest your respective LLCs be the members of the JV LLC, but check with a lawyer - maybe there're legal reasons to own the new LLC under your personal names rather than under your LLCs.

Transparency is easy with a joint bank account. Btw, if there're any concerns about transparency and trust - it's best to not do business together.

How Do My Partner and I Both Have Visibility To Profits/Expenses?

How Do My Partner and I Both Have Visibility To Profits/Expenses?

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