LLC questions im just starting out

[Terrenzo Monrovia]

Question, what is the best route to take starting an LLC to purchase investment properties? I have a partner who is financing the entire project ( purchase of home and rehab money) and im going to do the management of the project. They want to purchase the property with an LLC but still want me to be a member of the LLC and we are splitting the profits 50/50. What is the best way to go about this and also what is the best way to elect to be taxed? I read that doing nothing will result in being taxed as a sole proprietor so I'm leaning towards electing to be taxed as a corporation. Is this a good idea? And is s corp or c corp best for this situation.Thank you ahead of time for all input.

[Scott Krone]

@Terrenzo Monrovia - as with the others, DISCLAIMER: I am not a CPA or attorney. To answer your question. Best route to starting an LLC. Easy answer is you can go onto irs.gov, and click EIN to establish your LLC. Just fill out the answers to the questions they ask. You can have an EIN in approximately 10 minutes. Same with Articles of Organization at the state level. Total cost for us in IL for both is less than $500.00. That is the easy answer.

Longer answer. Personally, I think it is great you and your partner want to use the LLC. I would agree with that decision. For an LLC, you can choose either S or C corp. You and your partners in conjunction with a CPA can determine which corp is best. You can elect that once it is established.

With regard to the structure, you and your partner should alsodiscuss that with an attorney.  There can be Managers and Members, or Managing Members (both).  It sounds like your partner is advocating Managing Members with 50% ownership for each.  That is all spelled out in the Operating Agreement prepared by the attorney.  As a side comment, what your partner has proposed is common as well.  

If you create the LLC with the EIN and the Articles, just deliver that information to both the CPA and the attorney. You can also list the attorney as the registered agent, so they will get all notices (if you know the attorney before, input their information in the questions for the EIN and Articles. This is a nice feature to utilize. Your attorney can do all this for you as well, but you can save yourself some money by not paying the attorney for filling out forms you have to provide them the info.

Hope that helps.