[WSBAPT] Using LLCs for a Joint Venture

[Philip N. Jones]

A joint venture is simply a version of a partnership.
Perhaps the best approach would be (as you suggest) two LLCs owning a third LLC.
My best guess is that the two single-member LLCs would not need to file separate income tax returns (they would use the respective social security number of their owner), but because the third LLC is not single-member it would need to get an EIN and file its own income tax returns.
And I think that (unlike the single-member LLCs) the third LLC (the two-member LLC) would definitely need an operating agreement, particularly with respect to what happens if they decide to split up.
Phil Jones

Philip N. Jones
Duffy Kekel LLP
900 S.W. Fifth Ave. Suite 2500
Portland, OR 97204
pjones at duffykekel.com<mailto:pjones at duffykekel.com>
(503) 226-1371 - office
(503) 853-1482 - cell
(503) 226-3574 - fax

From: wsbapt-bounces at lists.wsbarppt.com<mailto:wsbapt-bounces at lists.wsbarppt.com> <wsbapt-bounces at lists.wsbarppt.com<mailto:wsbapt-bounces at lists.wsbarppt.com>> On Behalf Of Dave Culbertson
Sent: Friday, January 27, 2023 2:18 PM
To: solo-and-small-practice-section at list.wsba.org<mailto:solo-and-small-practice-section at list.wsba.org>; creditor-debtor-section at list.wsba.org<mailto:creditor-debtor-section at list.wsba.org>; wsbapt at lists.wsbarppt.com<mailto:wsbapt at lists.wsbarppt.com>; wsbarp at lists.wsbarppt.com<mailto:wsbarp at lists.wsbarppt.com>
Subject: [WSBAPT] Using LLC's for a Joint Venture

Hello, Listmates.

Two people are considering starting a service business doing landscaping and light remodeling, kind of on an experimental "see-how-it-goes" basis. Both have done so as sole-proprietorships. One party has already set up an LLC, to try to begin providing more professional face to the world (but hasn't used the LLC in any significant way yet).

The two parties hope to join forces, see if working together works, and if it does they keep going. If it doesn't, they decide to each keep working on their own separate businesses, without too much difficulty in disentangling.

It occurs to me that maybe the best structure is for each to have an LLC, so that if they decide ultimately to go their separate ways, each has a business structure already in place. And then the LLC's could engage in a joint venture, or jointly own a third LLC that could be easily ended if the project doesn't pan out.

Only thing is, I don't know much about joint ventures or "LLC owning an LLC" scenarios.

Any thoughts on this scenario, its benefits and its pitfallls would be welcome.

Thanks!

Best Regards,

Dave Culbertson

The Law Office of Davisson Culbertson
PO 20403
Seattle, WA 98102

Phone: (206) 478-8134
FAX: (866) 867-7796
dculbertson at culbertsonlawoffice.com<mailto:dculbertson at culbertsonlawoffice.com>



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