If that doesn't work, I would simply wait and see if they want to proceed legality before I spend any money.

Focus on flipping, being a legal birddog and wholesaling.

What is the best legal structure for an investment team that will be flipping a little and holding some properties to rent?

I'm not sure how legal that is.

A bit of a pain when it come to timeline but considered almost legally required in some markets.John Corey

Operating expenses include taxes, insurance, management, maintenance, utillities paid by the owner (including during vacancies), advertising, entity maintenance, legal fees, evictions, court costs, capital expenses (not technically an operating expense), damage done by tenants above the deposit, lawsuits, office supplies, etc, etc, etc.Mike

And can he legally withhold it for reasons other than pet damage?

In some states the cost of registering a foreign entity is the same or more than a domestic entity.Given the property value it might make sense to create 1 entity per property and then have the two of them owned by you or owned by a third entity.You are definitely in the area of tax and legal advice.

I am an inactive RE agent and i have been in the legal field for about 3 years.

I would get the legal advice first so you know what you are facing.