Recently four guys from the area contacted me. Together they planned on purchasing over a dozen rental properties. Each brought something to the table: capital to finance the project, construction and rehab skills, accounting and paperwork, and experience with rental properties. The one with the experience was the one who insisted they set up a Limited Liability Company (LLC) and carefully design their Operating Agreement.
The partner with experience knew that often times businesses don’t work out as planned, and reality often differs from projections. So these partners asked me to draft an Operating Agreement that not only detailed how the LLC was to be managed, who had decision making power, what decisions required only one partner’s signature and what decisions required all partners to sign, but also what we call “off ramps”.
“Off Ramps” are designed exit strategies from the business. These can be voluntary or involuntary. If a partner decides to retire and move from the area, an “off ramp” has already been designed in the LLC’s Operating Agreement to allow for voluntary withdrawal. Or if a partner stops pulling his weight and decides to let his other partners do all of the work, an involuntary “off ramp” exists where that partner’s interest can be bought out based on a pre-determined formula.
If you’re in business with partners, you need to have a carefully crafted partnership agreement. Local area accountants often refer individuals interested in creating an LLC or other business entity to our office. If you’re thinking of starting a business, let us help you get started on the right foot. We can assist you with getting your Missouri LLC up and running quickly.