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Joint Ventures have been dramatically increasing in popularity since the 2009 recession. These agreements offer investors a way to pool funds and split profits easily, allowing them to afford investment properties they may not be able to acquire on their own. New investors and veterans alike take advantage of these simple agreements, often in the name of securing profits on a relatively short timetable. That said, a Joint Venture is only as strong as the documentation accompanying it and the entity formed in its name. Typically, investors will form a venture-specific LLC. Royal Legal Solutions can assist you with drafting your Joint Venture Agreement and venture-specific LLC. Learn more about why many real estate investors need venture-specific LLCs and the assistance of a qualified attorney below.
What Are The Parts of a Joint Venture Agreement?
A Joint Venture Agreement is a partnership agreement typically found as part of an LLC. In the LLC context, it is referred to as an Operating Agreement. Details about how profits and losses are divided, who controls the operations of the LLC, and which rights and responsibilities are designated to each partner are outlined in the LLC's Operating Agreement. Properly created LLCs and Operating Agreements leave little room for the ambiguities that often land Joint Venture partners in court.
Every partnership starts off with the best of intentions. If everything works out beautifully, there is usually not an issue. But since most lawsuits and legal disputes stem from misunderstandings, we have found these can often be prevented by using the proper structures and having detailed documentation. When we help you with setting up your venture-specific LLC, you will receive a well-crafted agreement that keeps everyone is on the same page in terms of understanding:
- Responsibilities of each partner.
- Profit sharing expectations. This portion can be tailored to your individual needs. Partners do not necessarily have to split everything 50/50.
- Voting rights on business matters.
- Emergency provisions. We actually spell out what will happen if things go sideways. This keeps you protected in the event of foreseeable, or even unforeseeable, complications. We find that having a procedure determined in advance can control the damage of an investment that does not go as planned, and even preserve the business relationship between the investors involved. We specialize in putting together these deals for real estate investors so that they are using the best methods from the collective investing community.
Why Do I Need a Venture-Specific LLC for My Joint Venture?
It's helpful to think of a joint venture kind of like dating. You may really like your business partner. Perhaps they are successful in their own right, or you've seen how well some of their previous investments have gone. A joint venture allows you to take a test run at investing together. Maybe things will turn out great and you will go on to get "married" by going into business together formally.
But as with all things investing, success is never guaranteed. This is why we recommend a venture-specific LLC. You form this entity, alongside an ironclad agreement, to protect yourself and minimize the unavoidable risks involved in such investments.
The venture-specific LLC also offers liability protection. At Royal Legal Solutions, we always advise our clients to never keep property in your own name in the long term. Joint Ventures are no exception to this rule of thumb. There is no degree of safety conferred by two individuals having their names on a property. The only thing that will save your assets in court is the LLC structure. In addition to maintaining your anonymity, an LLC by design gives Joint Venture partners some very necessary liability protections. In the real estate industry, where anyone from a disgruntled tenant to an injured contractor or even your fellow investors can easily sue you, liability protection is essential for ensuring you won't lose everything you have worked so hard for in a court judgment.
Why You Should Choose Royal Legal Solutions For Your Joint Venture
At Royal Legal Solutions, we are real estate investors ourselves as well as attorneys. We have enjoyed Joint Venture successes, and also seen them gone horribly wrong from a professional standpoint. Joint Ventures can be a great way to turn a quick profit and forge a good relationship with another investor. However, they are not at all without risk. We are here to help you protect yourself when you engage in any real estate transaction or business relationship.
Whether you choose Royal Legal Solutions or another qualified attorney, it is crucial to have some oversight for your Agreement and LLC. Improperly formed or filed LLCs will not give you the liability protections you need, and even worse, could end up totally useless. Usually this happens when investors try to act as their own lawyers or seek out the assistance of Google, J.D. Don't make this mistake. You don't have to. You've worked hard to build up your real estate portfolio, and defending it with professional help is absolutely worth the investment. Contact Royal Legal Solutions today for more information about how we can help you minimize your risk in a Joint Venture.