LLC Question
I have a two member LLC with a family member, a 3rd person finds a deal and wants us to help him with it. How do we go about purchasing now with a 3rd person entering the picture as far as a split is concerned? Since its a temporary partnership wtih the 3rd person, i wouldnt want to add him to my current LLC. Suggestions?
Your LLC and this 3rd person can form a partnership as one method. This can be a registered limited partnership or simply a set of agreements.
Alternately, the 3rd person can form their own company and your LLC and their company could enter into agreements between the two companies.
These would be the most likely means, there are others.
Regardless, go overboard on the documentation. Document everything that is done, everything that is expected, and expected timetables, what happens if the timetables are not met, and all financials. The largest source of problems in this type of case is a difference in expectations that is never written down.
Document who will be providing what financing.
Who will be doing the work.
The exact work (by area) to be done - for example, keep or replace kitchen cabinets? Replace bathroom fixtures but fix existing tile, etc. This will help keep your focus and prevent scope creep.
What happens if the person doing the work doesn;t compplete it on time? By what time are tehy expected to have each area ready and the whole house ready for marketing or occupancy, etc.
What is intended for the property, rehab and sale, rental, other?
How will the expenses be split, how will cost overruns be funded and divided? how will profit and tax issues be divided?
These are just a few of the questions that should be answered in writing by agreements between you/your LLC and the 3rd person before signing onto this project or providing any money. Be thourogh.
As far as disbursments go, have the lender lend to the LLC and then paid back with interest agreed upon at the begininng. Include a % of LLC income to be paid to you and your husband for your services per deal. This you can all work out with an agreed amount. The 4 of you are going to have to determine what is a fair interest rate and what amount of fees are fair for your services.
Then any profit left over can be left in the LLC for future investments, or be distributed evenly.
Then the next deal would be evaluated and written in a similar matter.
Just my thoughts.
Both!
I would consult a good attorney to see what they would recommend.
If there is an IRS lien on the property the title cannot be transfered until the IRS is satisfied. If you buy it be sure to use an attorney to draw up the papers and get title insurance to protect your title. There may be other creditors looking for a piece of his assets.
Jim[ Edited by jimandlacy on Date 12/16/2005 ]
Owing the government taxes in and of itself does not create a lien on your property. However if they have an actual judgement of deficiency against him or an actual lien placed on the property then he could not transfer title because it would not record till lien is cleared up. (Normally). Owing other people money does not stop him from selling either. Just because you owe a ton of money does not mean you cannot do buying and selling your property. If anyone has anything against it , that would be a recorded lien. If he sells with intent to defraud that is something else but nothing you would actually know. If you buy it without any liens on it what he does with the money...how would you know and even legally why would you care. People owe back taxes to the IRS all the time.
If the IRS has filed a judgment against him it will attach to any property he owns and you will inherit
it in the propertys title if you buy from him.
You can have a title company check it out for you sometimes theyll check it for free
or you can check it yourself at the local county recorders office where the prop is located