LLC to DBA in many counties -- How do I get there!
I have an LLC with two other men. We gave one person 34% and the remaining 2 people 33% shares. To pay our selves per deal we said we would take 30% of a deal as pay divided via shares percent.
We have decided to open other offices in other counties. We want to use the current LLC formed to make the additional offices DBA's. These new DBA's would have a new person that we would then leave to run the DBA.
When we form the individual DBA's we want the new person to receive say 85-90% and have the remaining 10-15 % of each deal come our way into the LLC.
when the DBA is formed, does it have to state each persons name that is within the LLC as well as the new persons since the new person is now like a partner or franchisee, or can we just say the LLC and the new person, or do I have this all wrong?
Also, I would like to have the title company manage the deals as always but I was thinking of using a special purchase agreement that directs the title company into giving the LLC it's share. Is anyone set up lime this ans using any special purchase agreements they wouldn't mind sharing or can someone of legal stature be so kind as to email me a text format purchase agreement I can use as well as tell me how to bind the DBA to this format? 
Noticeofdefaults,
About 4 years ago I used a DBA for a home business. All I had to do was go down to the County Courthouse and file one form with my name, address, phone number, DBA name, and type of business I was going to be engaging in. I had to pay a small fee upon filing (I think it was about $15). For it to be completely legal I had to run an ad in a local newspaper (a very small circular) to advertise that I was operating as a DBA. That was all it took to establish a DBA.
A DBA allows you to use the name you chose to conduct business, that's all. You will most likely still need a business license from your County to actually conduct your business. Weird, isn't it? You can get a license by filing some more paperwork at the courthouse and pay a licensing fee of around $45.
Another route to go might be to form a separate Limited Partnership between your LLC and each new "member". You'll be able to reduce your risk while still maintaining an interest in every deal each one of your partnerships produces.
I'm not an expert on the use of Partnerships by any stretch of the imagination, especially when it comes to the tax consequences involved. I am currently operating as a multi-member LLC, and I plan to occasionally arrange the use of a simple land trust on deals that may involve someone "outside" of the LLC. I hope this makes sense.
Taxjunkie and Cash are very knowledgeable in this area. I hope that I was able to help you out in some small way. Good luck with your investments and let us know how everything turns out.
[addsig]
Thanks for your reply. I would still like to hear more comments on this.
Iv been studying Crei for awhile now but im not sure what LLC's or DBA's are iv heard them talked about b4 but im not really sure what they are or what they do. Could some one please inform me. thanx dmb10483
LLC=Limited Liability Company
DBA=Doing Business As
[quote]
We have decided to open other offices in other counties. We want to use the current LLC formed to make the additional offices DBA's. These new DBA's would have a new person that we would then leave to run the DBA.
When we form the individual DBA's we want the new person to receive say 85-90% and have the remaining 10-15 % of each deal come our way into the LLC.
Q: when the DBA is formed, does it have to state each persons name that is within the LLC as well as the new persons since the new person is now like a partner or franchisee, or can we just say the LLC and the new person, or do I have this all wrong?
A: The DBA will be listed in the LLC and the new person's name, but for the reasons discussed below, I would advise against your structure.
Q: Also, I would like to have the title company manage the deals as always but I was thinking of using a special purchase agreement that directs the title company into giving the LLC it's share. Is anyone set up lime this ans using any special purchase agreements they wouldn't mind sharing or can someone of legal stature be so kind as to email me a text format purchase agreement I can use as well as tell me how to bind the DBA to this format?
A: This "special purpose" agreement you describe will likely legally be construed as a general partnership! Any under the general partnership laws in most states, partners are JOINTLY AND SEVERALLY LIABLE FOR THE DEBTS OF A PARTNER! (That is a fancy way of saying the LLC could be struck with the debts of all the DBA partners!)
I doubt you really want this to happen.
It appears you want different DBAs since you want to operate with different names in different cities. The problem with that is you will never build up any goodwill in the name throughout the state.
If you want to pay this person that is "partnered" with the LLC, if you wish to keep it simple, I would simply structure it as an independent contractor arrangement, paying the person a fee on the deal. Notice I did not say a percentage of the profits. Under most state general partnership laws, it is presumed to be a partnership there is "2 or more persons (including entities such as the LLC) that have entered into a business relationship for profit."
The better approach though, although a little more paperwork will be involved, is to set up a separate LLC for each city, with your LLC being an 85% member in the other LLC with 15% owned by the other person. That would give you the best segregation of book-keeping and protection for liability purposes.
Hope that helps,
Taxjunkie[ Edited by taxjunkie on Date 04/30/2003 ]
[quote]
The better approach though, although a little more paperwork will be involved, is to set up a separate LLC for each city, with your LLC being an 85% member in the other LLC with 15% owned by the other person. That would give you the best segregation of book-keeping and protection for liability purposes.
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Now you're talking
But let me ask you this if you will ... Lets take this quote, and do some backwords thinking with it since backwords thinking on this quote fits the structure I am looking at doing, or based on your advice, not doing.
You say to set up a separate LLC for each city, with my curent LLC being an 85% member in the new LLC with 15% owned by the other person. But, what if I treated it more like a franchise and I set up a seperate LLC for each city/county with my current LLC being a 15% member in the new LLC with an 85% owned by the other person. Could the bookkeeping still be handled within the seperate original LLC comptroller, cpa etc., and still provide protection for liability purposes, or am I out of my mind?
See, I like the structure of them bieng like a franchisee, but under another name, and having the freedom to say YOUR FIRED if need be and put someone else in place without charging the franchise fee, but still getting my 15% on the deals they do!
I hope that last paragraph helps you in structuring your next responce. I want to thank you taxjunkie, and I look forward to hopefully shaking your hand one day!
I'm new to investing but was trying to decide on a business name and wondering: To use a name in makerting, does it have to be a registered DBA? Can you just start using a name or do you need to check availability or what?
Thanks in advance!
Ty
tntmoz,
That is correct. When I filed for my DBA, I had to perform a search on a computer in the County Clerk's Office to make sure the name I had chosen was not already being used! Once you decide on your DBA name, you'll still have to advertise in a local newspaper for 4 consecutive weeks that you are now Doing Business As.... It doesn't have to be a big daily paper! I advertised in a small, legal newspaper that is only published weekly. Your County Clerk's Office will probably have a list of these for you to chose from. Hope this helps.
[addsig]
NoticeofDefaults:
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You could set up each LLC as owned 15% by your LLC and 85% owned by the other person. However, that would not be considered a franchise.
I think you are using the term "franchise" losely or otherwise do not understand what a franchise really is.
A franchise is really a type of license agreement whereby the franchisor owns the tradename and trade secrets. As part of that franchise agreement, the franchisee agrees to run his or her business in the manner prescribed by the franchisor and also agrees to pay a "royalty rate" (i.e., franchise fee) based on a flat fee and a percentage of the gross revenue generated by the franchisee. (like McDonalds corporate is a franchisor to each person owning and running a McDonalds store)
If you really mean franchising your idea, it will be important to find an attorney that knows franchising law. State and some federal laws are pretty tough on franchising laws, so you need to be well advised legally before going down that path!
Alternatively, you could set up multiple LLCs for each city. But here again, if you only own 15%, you will want to make sure the LLC agreement requires UNANIMOUS approval of certain actions so that you cannot be out voted on business operations (obtaining debt, selling the LLC, selling the assets of the LLC, entering into contracts, including management contracts to the person owning the 85%! etc.).
If your LLC owns interests in other LLCs, it is generally a "tiered partnership" arrangement.
Book-keeping for each entity will have to be done separately for each LLC since each entity is taxed as a partnership and files its own tax return. Your LLC controller could always do the books for the other LLCs if you want. You don't have to hire another controller to do that type of work. Just make sure you have a management services contract is place between your LLC and the other LLC.
But on the issue if you are still provided liability protection for these tiered LLCs. I think you are missing the focus on the LLC. Remember, each LLC is a different entity for state law purposes (liability protection is generally a state law issue). For the LLC to be disregarded and one LLC to be liable for the debts of another LLC would require a creditor to "pierce the LLC veil" of the LLCs. Piercing the veil is a judicial doctrine based on the facts and circumstances, so I am unable to tell you if, in fact, your tiered LLC arrangement would still provide you liability protection or not. It will depend on how you run your LLC's business and how the other LLC is run. If one LLC is just the alter ego of the other LLC, you probably have problems.
But what you describe is not uncommon. Many people have multi-tierred LLCs and still have liability protection because they follow their state LLC law.
One item that concerns me about your question is I don't think you fully understand what you can and cannot do with an LLC. ("See, I like the structure of them bieng like a franchisee, but under another name, and having the freedom to say YOUR FIRED if need be and put someone else in place without charging the franchise fee, but still getting my 15% on the deals they do!"
Hiring a person is independent of making them a member in an LLC. In some states, if a person is a member AND happens to be an employee of the LLC, it may be difficult to fire that person if the expectation on setting up the LLC that the person's livelihood would be generated by his/her investment in the LCC and also working as an employee in the LLC.
Even if the law allows the LLC to fire that person (which will be difficult if that person owns 85% of the LLC and voting is set up by majority interests! -- again you need to draft the LLC agreement correctly to ensure you have the control even if you have only a 15% interest in the LLC), that person will still be a member in the LLC unless the LLC has a "buy-sell" provision that gives your LLC the right to purchase the other person's LLC interests if they become unemployed by the LLC.
So, you see, the arrangement you describe does not freely permit you to fire the other member at will unless the employment agreement and the LLC agreement is drafted correctly.
Hope that helps,
Taxjunkie