All Forum Posts by: Mitchell Zoll

Changing the company agreement (operating agreement) is the result, it’s not the way the ownership is transferred. I see so many folks starting businesses then not treating it like a business. Please go to a lawyer who has litigated these issues (not one who just has a notebook of nested entities to sell you) and they can show you what you need to do this right. Don’t start a business to avoid liability then do things half way and create liability in the future.

Start with the partnership agreement/operating agreement.  If you are in different states from the property, and possibly with the other members, there are significant jurisdiction questions that you need someone to review. if you can't find that agreement contact the lawyer who drafted it for you all for a copy. 

Please talk with a lawyer about setting this up correctly, whether you use his existing LLC or create a new one. There are a bunch of issues that you need to address now with your Company Agreement - even MORE so because you are family - Not less.

As for how to do it if you are going to use his LLC. Think of it like he owns 100 out of 100 "shares" of Dell stock. You want to now own 10 "shares" and he owns 90. How do those shares get to you? What paperwork do you show the IRS or bank or other members in the future to show who owns what, and when that ownership started?

It's the same for his company. Membership Interest (LLC) = stock (Corp). His LLC = Dell. It's not different because you are family. It's not different because he hasn't done much with it (although the price of the interests you get will be near zero!)

Amending the Company Agreement is part of the process because it documents who owns what inside the company. But that's the end of the process.

You need someone who understands the law where the property is located.  Assuming that's California, you want a California lawyer. From there ... a good/experienced lawyer is more important than someone close to the property. But if the property is in Lodi and the lawyer you get is from San Diego, an opposing lawyer will know you are going to have to change lawyers or pay the San Diego lawyer a BUNCH of money to litigate where the property is located. 

You can possibly use the lawyer you used to create the entity and draft the entity documents, but be careful to know who they represent (you or the company) and to make sure it won't create a conflict of interest with the other member of the LLC.

If you have reached out and there is no response - spend your energy now getting educated on your options and how best to move forward. 

This is a civil litigation matter so start with an attorney who handles civil litigation. Before you make a move gather your documents, emails, meeting minutes etc and meet with them to find out what you can do and what the risks might be. Referrals from friends who have been in this situation would be best (just don’t involve them in this dispute). If you can’t get a referral, check your local bar association to see who is part of the civil litigation section. Review their websites and reviews to find one who handles partnership/business disputes. 

Great! If you are working with a lawyer then you should be getting the advice you need.  No need to do something different because of someone posting on the internet!

You are looking at it wrong.  The best way to avoid lawsuits isn't in the entity structure, it is in the way you operate the property. First place to start is your state and local property codes/statutes. Then have a lawyer review those statutes with you and review your rental agreements. Then have your insurer review your property to mitigate any risks.  If you start with multiple LLCs and Series LLCs, you might find that those nested and complex entities don't protect you from lawsuits, they just create more defendants. 

Hey Karen - Before you get too deep into the Series LLC you might call a few banks, title companies, and insurance providers to see if this is going to be a recurring problem. I see you just bought the property so it might be still early to change paths to a traditional LLC and avoid these future issues. However if your lawyer/CPA have recommended a Series for your particular situation - you might reach out to my friend Alex Gonzalez at Texas Partner's Bank, 512-956-5675

Get with your CPA. When I establish LLCs I always ask my clients to have a meeting with a CPA from the start, even if they are going to file their taxes on their own. There are so many "easy" decisions when you form an LLC that aren't really easy, and you need a good CPA to see your entire situation before they can give you good advice.

Also note that when you formed/purchased the LLC, you weren't married yet. You need someone to sit down and evaluate the entity from that standpoint, not just as it relates to income from the property after you got married (and Congrats on the recent wedding!) Make sure to let the CPA know of the change in your status and what it was when you formed the entity. 

I have used Doug Plummer at Midtown Title (part of Independence Title) for my personal investment transactions as well as VERY complex M&A transactions where my client purchased an entity with substantial real estate holdings. They were flawless, they were ahead on every step, and when we had a slight issue with one of the parties they proactively identified a solution to keep the transaction on track.  Can't recommend them enough.