LLC? Partnership? Corp? Friends?
What is the best type of organization for a REI business with 3 people (my husband, myself, and our friend). We are hoping to flip 2 properties w/in the first 6 months, and then purchase multi-units to flip/rent. It is my understanding that the tax consequences are better if the unit is owner occupied, but if you buy it under an Corp or LLC can you still avoid Capital Gains tax when you sell if you live there (and how long do you have to reside there?). All three people are necessary : we have $35K and the partner has $100K, and we all have specific skills construction/renovation skills.
I would greatly appreciate advice on this matter as I am suppose to meet with our lawyer on Wednesday.
Thank You,
~Gayle
This is a fabulous question as I'm about to enter into a similar deal. We have 2 major players.
Investor: Will finance the purchase and repair ($50,000)
Me/Uncle: Will handle paperwork, rehab, sale.(time, work, and expertise)
Should we use an LLC to setup the deal? And what is a fair split of the money (we expect the total profit to be at least $75,000-$100,000)
[addsig]
I can't believe that no one here has an answer for me or the beautiful Gayle
[addsig]
This is a hard question to give a simple answer to. Different situations and business plans call for different entites. A lot of people use the LLC for a variety of reasons - limited liability, tax, etc. but it might not be appropriate in every circumstance.
The best advice I can give is to talk to a knowledgable attorney who works regularly with real estate investors and business planning.
With that being said, there are some good threads on this site you can search for regarding this topic.
Good luck
If you don't already know the profit split (which i think 50/50 is fair), are you sure your investor will provide the cash for repairs?