LLC tips

[MISterKnight]

Before someone ask, yes, an attorney is hired and helping us with these questions, but I thought I'd solicit a little feedback from those in the cooler that started or own their own businesses. If you are part of a multi-member LLC or something similar, what are some things that you are glad you did or wish you had when starting the company? Any big pitfalls I should avoid or thing to look forward to?

 

[cnsaguy]

Originally posted by MISterKnight:
wish you had when starting the company?

Enough capitol to do it on my own. Multi-member businesses will always end in disagreements, either small or large. I've been a member in 3 (2 still current) and have seen numerous others (all in the same business field/scope) and all have had some internal conflict, especially when the money faucet shuts off and it's time to get lean.

At the end of the day the utopian vision for the business turns into finger pointing, he said/she said and litigation. My experience may be a little isolated in that all of the business mentioned above it was a common member in all of them that caused the problems.

The only issue I had with the LLC was the estimated income taxes. Such a PITA. Good luck to you and build it up to where you can sell at a good number and ditch the partners.

 

[Game_Day_Sports]

If there are multiple shareholders, make sure you have the following clearly spelled out.
- What happens if one of you die, become a veggie, or get divorced. Maintain who has control of the shares of the incapacitated partner. And make sure that they aren't transferrable as community assets in a divorce proceeding. You don't want the crazy ex to have a say in the company.

- How is it handled when one party wants out of the company. The pre-nup clause as it were.

- How is it handled when you have an offer to sell and one party wants to and the other(s) don't.

- Cash calls. What happens when cash flow is tight. Who is responsible to kick in and what happens if they can't.

- Personal Guarantees - who is on the hook for personal guarantees for leases, lines of credit, etc.

- Po Po - what happens when somebody gets caught with that 17 year old with her head in the driver's lap "napping".

Pretty much just figure out the worst possible things that could happen and make sure you spell it out up front what happens.


On two of my companies, I am actually not considered an "owner", but I control the company. Put everything in my partner's names and let them screw with the taxes and legal issues. I have a licensing agreement for all of the intellectual property that is basically what those companies provide and then I have a buy sell agreement if they were to ever be approached for acquisition.


A couple of other things
- It is better to put it in writing before there is a problem then try to sort it out after there is.
- Take care of yourself first because even though you may be best buddies now, when money gets tight and it is hitting the fan, your best buddy will react to the financial stress. How that person reacts you don't know so prepare for the worst.
- People lie, memories fade but documents always tell the truth.

TLDR - Sorry it is long

 

[1ofTheseKnights]

CNSA & GDS speak the truth. W/o knowing more about the specifics of the LLC I agree with them.

 

[ProAttitude]

This is why I cruise 'da cooler.

 

[goodknightfl]

My biggest advice, if you can pull it off without partners, do it.

 

[crambone]

Pull out of your partner before it's too late. That's what I gleamed from this thread.

 

[OlearyLookAlike]

You should consider the LLC structure for tax purposes. I have one LLC with an S Corp Election and one that is a normal partnership tax structure. I use the S Corp LLC for my real estate brokerage/consulting fees and the regular LLC for any real estate deals I am a partner in because it's more beneficial for taking depreciation losses and mortgage interest etc.

You want to shelter as much of the income from Self Employment tax as you can so that is the advantage of the S Corp election.