All Forum Posts by: Sean Morrison

That price and their proposal sounds nuts for where you're at. One thing to keep in mind though is that if you are doing wholesaling and buy-and-holds, then you'll want separate entities. That way there is a clear divide between your passive and active incomes.

Short answer is yes, you can restructure your LLC after filing. Some things may require filing an amendment with the Secretary of State. For example, if you original articles say your LLC is member-managed, then you will need to file an amendment to make it manager-managed.

Most of what you are talking about relates to the operating agreement, which in most states is not filed (not sure about RI). A good attorney can help you with protection strategies within that. Advanced planning may rely on more than one entity to achieve things like anonymity, more asset protection, etc.

First, piercing the veil does not happen until a court orders it so. In other words, don't give up. Second, create a separate bank account for your company so you don't have this problem again. Third, follow @Ashish Acharya's advice and have a good bookkeeper go through your records to identify personal vs. business transactions. If they are correctly separated in your accounting, then co-mingling the funds won't be a deal killer. Finally, the longer you have things properly separated, the more likely a court will say that it is a separate entity. So get started now.

There's nothing wrong with this plan, and it has a lot of advantages. But it's top shelf for just three properties. The real question is one only you can answer - how much do you want to invest to mitigate risk? That means figuring out how much risk you have, it's potential cost, and then the correct amount in mitigating it.

Is this a plan you need now, or one that you could eventually aspire to as your portfolio grows?

More insurance is another great way to deal with risk.

The easiest thing to do is to reach out to the owner of that parcel, and simply ask for an easement to use that private road. They should be able to tell you the terms of the easement, assuming they set it up. They will probably ask for payment, and you'll have an attorney draw up an easement and file it with the County. 

Two issues immediately pop out. First, beware of them taking the money or materials, and just never finishing. Second, what is their investment? Your investment is easy to measure - the total you spend on materials. Theirs is trickier beyond the value of the land. The value of their labor needs to be negotiated and agreed to up front, or it could quickly rise to a level that cuts you out of the profits. This is not an uncommon deal - just one that needs to paperwork up front.

You may also want to consider structuring this as a debt deal. It might pay less, but you'll have more legal recourse if something goes wrong.

The LLC would provide some liability protection, and general business liability insurance would probably cover you as the manager. The primary reason to consider it is to make your business look legitimate, and open to bringing on a partner in the future.

@Alina Trigub makes a good point about the passive investor being a securities sale. However, that is not a difficult hurdle. You will need to make sure to file for an exemption with the SEC and follow some rules on advertising and other things. A debt structure would avoid that though. I notice that you did not mention forming a corporate entity. If you do a partnership, you and your general partner will be personally liable for any debts or liabilities arising from the business. Have you looked into an LLC?

You're also getting some asset protection benefits. If your retail business hurts somebody, but doesn't own the building, your building should have some protections in a lawsuit or creditor problems. The reverse is also true.

Just talk to @Bob Norton. He's focused on real estate investors.