How to Protect Yourself in a Joint Venture Deal

How to Protect Yourself in a Joint Venture Deal

Whenever you going into a joint venture deal, you’ll almost always be inside an LLC where you’ll be a partial owner of that company.

A lot of times you’re protected because the property’s going to be owned by a limited liability company (LLC). So if anybody were to sue you or your partner, they can’t get to the ultimate asset.

Imagine a scenario in which you and your friend form a company together to buy a house. But your friend gets sued, and therefore there’s now a charging order against the LLC. If you don’t know what a charging order is, look at our other video regarding that.

Essentially, a charging order dictates that if there’s any money distributed from the LLC it has to be used to pay off the creditors to the extent that your friend has an interest in the LLC.

Now your friend has to pay back those creditors before you can get any money out of your investment

This is not the case if you guys both enter into it with your personal LLCs that you used as investment vehicles. Use your own LLC to become members of the LLC used for the JV agreement. This will allow you to distribute money that you can now control without having to pay off those creditors.

 

Scott Royal Smith is an asset protection attorney and long-time real estate investor. He's on a mission to help fellow investors free their time, protect their assets, and create lasting wealth.