[quixy]

My mother-in-law and I would like to go in to business together. She is providing the investment capital and I am doing the work. I plan to do small-scale real estate investment -- both rental properties & renovating properties for sale. She just took out a mortgage in her name on the first property, a rental that we do not intend to sell any time soon but that we had to buy before we had time to incorporate and do it under our business name. So, here are my questions:

- What is the best small business setup for us? I am leaning towards LLC. Should she be a partner or an investor? Down the road (after a set, pre-determined time), the plan is that if/when she wants to, she can be bought out of her investment at a pre-agreed upon rate.

- How can we get the property in to the business' name as an asset without refinancing it? The company won't have enough credit off the bat to get a refinanced mortgage in its own name. Can she give it as a gift or an investment so it shows that the company is paying the mortgage through the rental income, not her?

- Do we need a lawyer to draw up the documents to start this business or can we do it ourselves since it's mostly on paper for now (until I finish school and start working on more properties)?

Thanks in advance!

[Fr_Chuck]

Well first you should have waited a few days and got incorporated, since it is so easy and fast to do.
But you need to do a buy/sale agreement between the two of you, including plans on what happens at the death of one or both.
Often you can use insurance to fund the buyout at death.
Also a written agreement of what happens if the business fails.

[quixy]

Well, I don't know if incorporating first would have done us much good in this case anyway. The company would have zero credit or income to qualify for a mortgage. That's why we thought doing it this way might allow us to acquire the property first and then somehow get it listed as a company asset.

Also, I am currently in Kansas attending school for a couple of years (so I have already changed my residency) but then I will likely be returning to Virginia for work and living. My MIL lives in Virginia. Do we have to incorporate in Kansas first and change it later?

[Fr_Chuck]

The main reason of course many incorporate is to protect their own money and for tax reason. If there is a law suit against the company then it does not effect your person liablity. And your personal liablity does not effect the corp.

You can incorporate in almost any state, many people incorporate in Nevada for some tax reasons, So you can live anywhere and do a corp in another state. The propery is going to be hard to transfer now, since it has a loan against it, unless you do a refi.