Fairness in Dividing the Founders: Understanding Startup Ownership One of the questions I wish clients would ask more is whether their division of ownership is a fair one. Most owners, in their fairness calculation, apply the following formula: 100% ÷ number of founders This advanced calculus may appear fair and equitable, but the reality is […]
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Due-on-Sale News: Fannie Mae allows transfers into LLCs
An enterprising investor on BiggerPockets discovered this useful nugget in the Fannie Mae Servicing Guide from 2017: Section D1-4.1, Information Relating to Transfers of Ownership Applicable to All Mortgage Loans D1-4.1-01, Determining Whether a Transfer of Ownership Is Permitted (11/12/2014) […] D1-4.1-02, Allowable Exemptions Due to the Type of Transfer Unless the previous borrower requests a release of […]
Continue ReadingWhat is an operating agreement?
An LLC Operating Agreement is a legal document that outlines the duties, rights and ownership percentage of the all the members who own the LLC. All of the owners must sign this document. It usually sets forth the financial arrangement of the members, how profits and losses are distributed, who has management rights, and what kind of […]
Continue ReadingLLC Timebombs: Have you read your Operating Agreement lately?
Potential clients often ask me, “why do I need a lawyer if an LLC is so easy to form?” Sure, it doesn’t take much effort to log on to the Secretary of State’s website, but there is much more to LLC formation than just putting your name into a form and paying $125. An LLC […]
Continue ReadingShould You Use a Series LLC? Exploring the Pros and Cons
The series LLC is a novel limited liability entity that promises to solve many problems of the real estate investor. This article is meant to highlight some of the pros and cons of using a series LLC in your real estate investment. The Pros The traditional asset protection advice that gets repeated all the time […]
Continue ReadingWhy a Single-Member LLC Needs an Operating Agreement
How easy is it to form a single-member LLC? Most investors log onto their Secretary of State’s website, pay their fee and file the state form to create their LLC, and think they’re done. Unfortunately, that’s not the whole story. A limited liability company needs to have rules about operating itself, what happens when it’s dissolved, […]
Continue ReadingThe charging order: a debtor-friendly LLC law
LLC gurus have often pushed novice investors to organize their LLCs in Nevada or Wyoming or some other faraway state. The charging order is usually the reason why WY or NV are considered “investor friendly.” Let’s consider a brief scenario. You own an LLC that holds several rental properties worth over a million dollars. It’s […]
Continue ReadingOhio and the charging order
Ohio law now limits a creditor’s remedy to the charging order when trying to get money out of an LLC. For a more extensive discussion on what a charging order is, see my earlier article here. The Ohio Legislature finally got around to limiting creditors’ remedies when trying to gain assets to a debtor’s cash […]
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