Buying Property with a Business Partner

If you are thinking about buying property with a business partner, it is important to ensure that you are aware of the legal considerations and risks involved. Just like any other business relationship, buying property with a business partner inherently presents legal issues—and making sure that you address these issues proactively is essential for mitigating your risk long-term.

5 Key Legal Considerations for Buying Property with a Business Partner

Here are five key legal considerations for buying property with a business partner:

1. Establishing a Formal Business Entity

Generally, any time you go into business with someone else, it is best to establish a formal business entity. From providing structure to your business relationship to mitigating your personal liability risk, there are several reasons why. The type of entity you choose to form (i.e., a partnership, corporation or limited liability company (LLC)) and where you choose to form it will depend on the circumstances surrounding your proposed property investment.

2. Anticipating and Proactively Addressing Potential Issues

Once you form a business entity, you and your business partner will need to negotiate a shareholder, partnership or operating agreement (depending on the type of entity you choose). While this agreement will serve several purposes, one of its main purposes will be to anticipate (and proactively address) issues that could arise during the course of your business relationship. This will serve to mitigate the risk of contentious (and costly) disputes in the future.

3. Sorting Out Your Financing and Business Plan

When buying property with a partner, it is important to make sure that you are on the same page as much as possible. With this in mind, you and your partner should discuss your plans to finance the property (and document them as necessary), and you should also make sure that you are in agreement on your post-closing business plan.

4. Doing Your Due Diligence on the Property

While it is important to address the legal risks associated with entering into a business relationship, it is also important not to overlook the risks associated with buying an investment property. Do your due diligence, and be prepared to walk away if the property presents too many unknowns or doesn’t fit with your business plan.

5. Knowing When to Rely (and When Not to Rely) on Your Business Partner

You and your business partner will most likely be dividing responsibilities before and after closing. While it is important to have trust and confidence in your business partner, it is also important to know when you need to step in to protect yourself and your investment.

To be clear, these aren’t the only legal considerations involved. Each acquisition and business relationship is unique; and, as a result, each presents its own unique set of legal challenges and concerns. By working with experienced counsel to ensure that you are making informed decisions, you can maximize your chances of profiting from your investment while reducing the chances that you will encounter a costly dispute along the way.

Speak with a Real Estate Lawyer at Rendigs

If you need to know more about the legal considerations involved in buying property with a business partner, we invite you to get in touch. Please call 513-381-9200 or contact us online to schedule an appointment with a real estate lawyer at Rendigs.