All Forum Posts by: Sean Morrison

Disclaimer: I am an attorney, but I am not your attorney. This is not legal advice, just friendly information.

It is not a problem to have foreign investors as members of your LLC. However, two things to keep in mind. First, if they are silent investors then this is still regulated by the SEC. If they are all out of the US, and nobody else in the US would be advertised to, then there is the little-known Reg S exemption which would allow this kind of fund-raise.

Second, technically all foreign investors should be searched on the OFAC database. While this is family and you probably know them well, having a record of having done the search can be some CYA if something were to happen. https://home.treasury.gov/poli...

Disclaimer: I am an attorney, but I am not your attorney. This is not legal advice, just friendly information.

As a general rule, real estate holding LLCs should be created in the same state as the property. While some states have better protections for LLCs than others, when it comes to real estate courts only want to recognize local protections. If you want your foreign LLC as a holding LLC, you could do that, but it's just more paperwork. Regardless, foreign LLCs do need to register as such in the property's state.

Disclaimer: I am an attorney, but I am not your attorney. This is not legal advice, just friendly information. 

As a general rule, real estate holding LLCs should be created in the same state as the property. While some states have better protections for LLCs than others, when it comes to real estate courts only want to recognize local protections. An out of state LLC could be the owner of the in-state LLC, but a local LLC is usually best.

Disclaimer: I am an attorney, but I am not your attorney. This is not legal advice, just friendly information.

There are a lot of "it depends" in this scenario. For example, if the new investors bought the shares from the original partners, the original partners would owe any capital gains on the appreciation of those shares. However, if the investors came in and bought into the LLC, diluting the existing partners shares, that could be an exchange. It is also important to know whether the new investors will be actively managing the property. If they are silent investors, they could be buying securities regulated by the SEC, and an exemption would need to be identified.

Anytime there are investors or new partners brought into a deal, an attorney should be involved.

Disclaimer: I am an attorney, but I am not your attorney. This is not legal advice, just friendly information.

The primary difference is liability protection. The LLC protects the members from each other, and from the business' liabilities (and the business from their personal liabilities). The LLP protects the members from each other, but they may still be individually liable (this is actually state specific. Some states allow for full liability protection like an LLC. Other states don't recognize LLPs at all). Frankly, all states recognize LLCs and they are much more flexible in terms of how they can be managed and how they can be taxed, and are much clearer in their liability protections.

Disclaimer: I am an attorney, but I am not your attorney. This is not legal advice, just friendly information.

For the attorney question, it depends on what type of attorney you need. So you may need more than one. If you need an attorney to handle an out-of-state property (like closing, legal issues, unique deed deals), they should absolutely be local to that state. Other matters, like your asset protection or business structuring, can be done with somebody else.

Disclaimer: I am an attorney, but I am not your attorney. This is not legal advice, just friendly information.

First, WY LLCs are oversold and provide very little beyond a layer of anonymity. While there are scenarios where they can be useful, they are used far more often that are beneficial. Second, Florida has very unique asset protection laws that are very good to investors. It's worth speaking with an asset protection attorney or somebody local in Florida about those options. Your local laws may be better for you than anything WY has to offer.

Disclaimer: I am an attorney, but I am not your attorney. This is not legal advice, just friendly information.

Sometimes a single member LLC can get away with a form operating agreement. However, when partners are involved it's never a good idea. I personally have worked on many dissolutions, fundraises, and successions that should have been easy, but had an online form controlling the process that simply did not make sense for the parties.

Disclaimer: I am an attorney, but I am not your attorney. This is not legal advice, just friendly information.

Sounds like you're describing a "friends and family" round of investing. Most people forget this, but any time a person invests money into a project that (a) they are not managing or (b) is not fully secured, then it's a sale of securities and regulated by the SEC. That goes for stock, partnership ownership, and even debt. Typically, a friends and family round can use the Rule 504 SEC exemption if it follows those strict rules, but it will also need a state-level exemption for any states where an investor resides.

As you can see, it's more complicated than simply taking people's money.

Disclaimer: I am an attorney, but I am not your attorney. This is not legal advice, just friendly information.

There's really not much benefit and the costs are pretty high. In order to move it to an LLC, you would need to deed the property to the LLC, which gets into due-on-sale issues with the mortgage company (see the many threads on that issue). As an LLC, you could lose any homestead exemptions for property taxes. Insurance rates (both homeowners and flood insurance) could go up significantly. But if you want to do it because you have significant liability concerns, then talk to an attorney first.