Investment property can be held in many different ways.

Depending on your goals & criteria, you might choose:

  1. Individual ownership/ Self Directed IRA
  2. Joint – with an investment partner/ spouse/ child/ siblings/ parent
  3. LLC / LLP
  4. S-Corp / C Corp
  5. Partnership
  6. REIT

When considering any of these, I highly recommend at a minimum discussing implications of various options with your:

  1. Lender / banker
  2. Tax adviser / CPA
  3. Legal adviser/ lawyer
  4. Insurable risk adviser/ agent

Property owned by other than yourself should consider at a minimum how your get in/ out/make decisions/ and handle disputes. The below you might sort chronologically as the decisions will need to be made (soonest to latest) – e.g. acquisition funds, insurance, depositing 6 months cash for payments & utilities, etc.

  1. Entity selection: Individual, Corporation, LLC, LLP, etc.
  2. Purpose / goals – this may point to an automatic time limitation and what will happen to extend or terminate.
  3. Allocations
  4. Initial investment
  5. Valuing non-cash investment(s)
  6. Management outline
  7. How / when decisions are made
  8. How / when to sell investment or buy more
    1. Co investors may wish a “first rights of refusal” when a sale is underway
  9. Rent decisions outline
  10. Who is the managing partner?
    1. Term
    2. Removal
    3. Authority
    4. Power
    5. Job description
    6. Compensation
    7. Right to delegate
    8. Authority to convey (sign list/sale docs)
    9. Standard of care
    10. Restrictions on the authority
    11. Indemnification
    12. Duty of Loyalty
  11. Tax issues:
    1. Who gets tax benefits
    2. In which proportions
    3. Who prepares the K-1 and by which date
    4. How accounting costs are shared
  12. What happens when there is a cash shortfall /Failure to pay contributions
  13. Loans by members
  14. Meetings/ Quorum
  15. How to allocate profits / losses
  16. Liability, Fire, Directors insurance
  17. Life insurance /how to fund
  18. Liquidating distributions
  19. Books and records
    1. Banking
    2. Reporting frequency  (month/quarter)
    3. Tax returns
    4. Location of books
  20. Death or incompetence of a member
    1. Will transfer
    2. Transfer to a permitted transferee
    3. Limited or unlimited power of appointment
    4. Sale of share to a partner … right of first refusal
    5. Estate planning transfers (Review life insurance issues so that share dispersals are limited to the same number of parties. I.e. shares go to wife not to the six children each with one portion of a vote.)
  21. Dispute resolution
    1. Mediation/ Arbitration/ Fist fights/ Name calling/ Ugly litigation <inserted to see if you’re paying attention



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