Given the subject of this post, it’s time for me to reiterate the standard disclaimer in the footer of this site. Neither I, nor any member of Hermit Haus Redevelopment, is a lawyer or a CPA. This site contains our perception of our experiences in the real estate redevelopment business. Nothing we say should be construed as legal or financial advice.
Last year, we (Hermit Haus Redevelopment, LLC) formed a joint venture with our friend Larry Andress’ company (Andress & Three, LLC) to work on the Ash House. Since then we expanded that agreement to renovate the St. John house, and we’re looking forward to doing more work together. Working with other investors splits the profits, but it also spreads the risks and enables both partners to do more deals.
Earlier this year, our accountant said we were doing enough work together that the JV agreement would no longer suffice, from their point of view. They recommended forming a general partnership because of the ongoing investment relationship. When I spoke with my attorney about this issue, he agreed but added, “The standard attorney response is that if you’re going to form a partnership and have an ongoing relationship, you should probably form another LLC to cover your assets.” That got me started thinking about the costs of forming and maintaining these various forms of entities. I’ve summarized my research in the table below as I’ve gone. (I’ve been working on this post for awhile.)
So what is the correct structure for you? It depends on what you’re doing and how long you intend to continue doing it. You need good advice for your individual situation. Talk to your lawyer and your CPA. In fact, talk to more than one of each and then make up your own mind.