Partners
My brother and sister and I want to invest in a condo and sell for a profit. For tax purposes, how do we need to get set up. How do we legally form a partnership so we can share profits and tax liability. Thanks
Any good partnership should be lawyer draftee.
I've been consulted about lots of bad ones, and without fail, those have not been professionally done, had lots of omissions and poorly written provisions...and caused the partnrs a lot more pain that they would have had with a well done agreement.
Set up an LLC. That seems to be the norm as far as real estate goes amongst most people but if there is anyway possible to do it alone, I would suggest that. If you guys are only doing one deal together just take what ever the profits are from the sale and then pay your own taxes. I think thats basicly how an LLC works.
I think the "answer" depends on your unique situation. With an LLC you have to register with the state and there are costs involved, it is not as simple as just calling yourself an LLC. Also, it may be more difficult to find funding for an LLC than for three people willing to personally guarantee a loan.
To form a partnership in most states you say I want to be partners and go forward. Notwithstanding, I highly recommend the the advice to see a lawyer. You need to sit down and make a partnership agreement so everyone knows the rules, the mission of the partnership, contribution/payout formulas, etc. Especially with family, it helps to have a neutral party pointing the way.
Don't confuse the legal entity with the operating agreemnt and buy sell agreement.
You can have a good entity and a bad agreement with partners ( relations or not)
I use an LLC for simplicity of setting up the legal entity and actually use the same one ( boilerplate) with a different name for each property. I paid $5000 for the first agreement. ( ouch) But thsi was when theyw ere new.
You can do this on line on the cheap now that they are common.
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