PARTNERSHIPS & SAFETY OF FUNDS

[Tim Silvers]

I am forming an LLC with another partner/member to facilitate the purchase of properties via short sales, REOs, and trustee sales. Having one LLC will make it easier to have all income and expenses accounted for under one roof as opposed to using our own entities to purchase, account for, and divide profits which is what we'd been doing before.

Funding for the deals will be from private money which includes that from friends and family. We will both be signers on the company account.

For short sales and REOs, the acquisition funds would be made available at close of escrow and secured via a deed and note. For trustee sales, the funds need to remain liquid in the company account while awaiting deployment at a moment's notice since our auction requires cashier's checks for the full amount to be presented prior to bidding. As such, the funds are therefore unsecured and "exposed" and therein lies the concern.

For those of you with multiple member/partner/owner LLCs, partnerships and corporations, what safeguards do you have in place to protect and prevent another member/partner/owner from siphoning funds from the company accounts?

Since there aren't any major banks that enforce dual signatures on accounts, an idea I had was to use a licensed and bonded 3rd party custodian account which requires dual signatures before disbursement. When the deal closes, escrow will cut a check back to the custodian since the title would be held in the name of the custodian for benefit of XYZ, LLC.

Any other strategies?

[J Scott]

I would never partner with someone if I didn't trust them not to steal from our business...