My two siblings and I are joint out of state owners of a piece of commercial property in Southern California. We have retained an attorney there to negotiate a lease on the property. He has told us that we should get a LLC. He gave us an estimated cost which amounts' to 3-4 hours of his time ($335/hr) plus. I asked a good friend of mine who holds a significant amount of rental properties here in Ohio who also owns real estate in Florida and he said his cost was $200-300 dollars. I asked my BIL who aslo owns a lot of real estate in Pennsylvania and he disagrees with my friends cost and sides with the lawyers estimate.

I'm clueless and just don't want to get ripped off.

Anybody done these in California and can give me some guidance on whats reasonable?

Thanks in advance

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MBlovr
'59 180 Dad's original
'59 180 Dad's 2nd one
'67 250SE Dad's last one
'59 220 SE My first one
'62 220SE Coupe second one
'89 190E 2.6 5spd third one
'06 E350 4matic (sold)
'10 E350 4matic

You can do it on legalzoom.com, for $150(and up). I think the fees are $600 or $800 a year. LLC's are one and Chapter X corps are the other. That's a tax to the state, not the site.

I guess I'm not clear as to how many attorney hours are required if I didn't do it online
Thanks

__________________
MBlovr
'59 180 Dad's original
'59 180 Dad's 2nd one
'67 250SE Dad's last one
'59 220 SE My first one
'62 220SE Coupe second one
'89 190E 2.6 5spd third one
'06 E350 4matic (sold)
'10 E350 4matic

It costs a RE investor I know $1,500 a year per LLC here in CT, thats with a lawyer setting it up. Said investor has 6 plus an S or C corp.

I don't beleive in DIY in this area. Lots of areas where you can mess up and get yourself screw. Pay the lawyer.

__________________
1999 SL500
1969 280SE
2023 Ram 1500
2007 Tiara 3200

The last thing you want is the cheapest lawyer you can find.

__________________
2002 E320 4-Matic
2008 Subaru Outback
2009 Subaru Forester

To form the LLC with the Secretary of State probadbly isn't too big of a deal. Here in NJ, you can do it online in 10 minutes. The application consists of 5 questions and payment of a fee of $200.00 iirc. BUT

Then you have to worry about the Operating Agreement. You can probably get a boilerplate version somewhere on line for cheap, but to try and cover all the bases of partner rights, duties, obligations, etc, etc. is daunting for most laymen.

I strongly advise you to create an Operating Agreement and have all the sibs sign it. Of particular concern are partner withdrawal provisions and whether the LLC will have any first rights in case any member wants to sell. Family members or not, your REALLY WANT to do this. And have expert advice in so doing. I'd say $1200-1500 isn't too big a deal. Some tax attorneys here in my small town charge 400./hr. $335 per hr. isn't too bad.


FWIW, Calif. charges an annual tax of $800.00 on LLC's. They also charge, if applicable, an annual fee depending on income. Link:
http://www.ftb.ca.gov/forms/misc/3556.pdf
And if you elect to be taxed as a partnership, the foreign partners are liable to pay Ca. income tax too.

First of all thank you kindly for your helpful response. In addition to the LLC the attorney wanted us to have a cotenancy agreement for I thought the reasons that you gave above ie if one of us wants to sell(again 3-4 hours of his time). To me it sounds like the operating agreement would cover that. What do you think? When you use the term foreign above is that equivalent to non resident?

__________________
MBlovr
'59 180 Dad's original
'59 180 Dad's 2nd one
'67 250SE Dad's last one
'59 220 SE My first one
'62 220SE Coupe second one
'89 190E 2.6 5spd third one
'06 E350 4matic (sold)
'10 E350 4matic

CA's Articles of Organization has 7 questions and has a filing fee of $70.00.
View it here.
http://www.sos.ca.gov/business/llc/forms/llc-1.pdf

By "foreign" I was indeed referring to any CA non-resident.

I do not know whether the "co-tenancy" agreement refers to an agreement between LLC members or between the landlord (LLC) and tenants under CA law. MY gut tells me it deals with tenant/landlord matters and not matters involving partner actions between themselves or between partners and the LLC. ( I am using the term partner interchangeably with member, which is the formal name for an individual or business investor/owner in an LLC.)

Hope this helps.
edit:
The more I thought about this, the more I think cotenancy agreement may relate to the way the property is titled to the several owners (as in "tenants by the entirety", "tenants in common", etc.) I think CA is a community property state and that term -- "cotenancy" -- may be common in CA legal circles or other community property states.
If this assumption is correct, a "cotenancy agreement" (whatever that is) would likely deal with legal ownership of the property. An LLC Operating Agreement would deal with the business rights, duties and obligations of the members (partmers). There may be some overlapping, but they two terms may not refer to the same legal document.

I'm not an attorney, so don't take anything I say as legal advice. That's what California lawyers are for.

Member?

Right on with the Operating Agreement. LLC is pretty much useless without it if it gets sued.

Laziness on my part. From a tax end, as you know, most multi member LLC's are now classified by default as partnerships under IRS guidelines, unless an election is made to be taxed as a corporation.
That being the case, it's just old habits dying hard (from a couple of pre-LLC decades in the saddle) in referring to members as partners, since the tax return (Form 1065) filed by LLC's predominately uses the term "Partner".

Thanks again your input is very helpful. With your explanation this stuff is now beginning to make a little sense and after reading what you said and rereading what the attorney said I am beginning to read his stuff in a different light and think that he is just doing his job.

__________________
MBlovr
'59 180 Dad's original
'59 180 Dad's 2nd one
'67 250SE Dad's last one
'59 220 SE My first one
'62 220SE Coupe second one
'89 190E 2.6 5spd third one
'06 E350 4matic (sold)
'10 E350 4matic