All Forum Posts by: Jason Marino

Hi Aron,

There are multiple ways to go about this. The ways that I have seen most often are to form a jointly owned LLC that includes partnership language in the Operating Agreement or to create a Joint Venture Agreement between the partners. The first option will address internal disputes and asset protection together. The second course of action will provide governance of internal disputes, but will not provide any asset protection unless the partners enter into the agreement using limited liability vehicles.

Hi David,

The post above is accurate. Attorneys generally have different specializations, so you will likely need to partner with at least a couple that deal with different areas of law based on your needs. You could get in contact with a larger firm as they would likely have all of these attorneys in different departments. Alternatively, you could reach out to multiple, smaller firms with different practices.

Hi Lily,

Many Purchase and sales agreements include State specific clauses. However, where I am located, there is not a requirement that you can only use the Purchase and sales agreement from the Realtor's Association. That said, I believe that you should be fine with creating a Purchase and sales agreement and having it reviewed by a California attorney. I would confirm this with the California attorney before moving forward.

Hi Emily,

As you can see in the posts above, this is an issue that comes up fairly often on Bigger Pockets, and there are differing opinions. The decision ultimately will be determined by your level of risk aversion. Insurance should be your first line of defense and will cover most law suits that occur on a rental property. However, insurance has gaps, and if or when coverage is denied, having a limited liability entity that owns the property provides a back up option. Despite what may be said, LLCs are widely used and can and do protect landlords against law suits if they are set up correctly and operated well. 

Hi Donnie,

It is actually possible for you to have all of your properties under the same structure and avoid the California franchise tax legally. The way that many people do this is the use of a Delaware Statutory Trust. This entity has many of the same benefits of a Series LLC, but it avoids the California franchise tax based on the fact that it is not an LLC. The Delaware Statutory Trust is usually paired with a Land Trust in this structure. The Land Trust is the title owner of the property, and the Land Trust is owned by an individual Series of the Delaware Statutory Trust in order to isolate each asset in its own entity.

Hi John,

The common ways of addressing this situation would be with a Joint Venture Agreement or by creating an LLC with a custom created Operating Agreement with your partner. The Joint Venture Agreement is the less formal and less costly option. This document would help to avoid and address internal disputes that were discussed in the posts above. However, it will not provide any asset protection. The LLC can provide the same level of detail as the Joint Venture Agreement to avoid and address internal disputes, but it can additionally be useful in protecting the assets that you and your partner control. I would recommend that you contact an attorney if you want to proceed with either of these options.

Based on my personal experience, it is rare to find a transactional attorney that creates LLCs and other similar entities and is additionally a litigator. These are very different skill sets, and many attorneys are specialists. That said, the common practice is to have the transactional attorney and the litigation attorney coordinate to assist a client if there is a lawsuit. As stated above, this would not be something that you get with an LLC created with Legal Zoom.

Hi Randy,

Your situation is not that uncommon, and there are very good structures for California investors that have properties inside and outside of the State. These structures provide asset protection while being able to largely avoid the California franchise tax legally. A way that this can be done is using a vehicle called a Delaware Statutory Trust. This entity avoids the California franchise tax, is able to replicate itself like a Series LLC in order to hold numerous assets, and has limited liability protection.

The post above is accurate. If an LLC is going to be the title holder to a property, the LLC should generally be from the State where the property is located or registered to do business in that State as a foreign entity. It is best to contact an attorney to discuss these issues.

Hi Graham,

Generally speaking, an LLC should be from the State that it is doing business or registered to do business as a foreign entity in that State if it is is from another State. Based on that, holding title to property is usually considered doing business, so you would want to use a North Carolina LLC or an LLC from another State that is registered to do business in North Carolina. There are legal ways to use Delaware and Wyoming LLCs in other States (there are benefits to using these types of LLCs as they are some of the most business friendly States in the Country), but it would involve a more sophisticated asset protection structure than just the LLC by itself.