Good for you and your sister to agreeing on how to manage your property before any disagreements or misunderstandings happen and to put that agreement in writing. I have several active files on my desk involving family members in such disputes. I am desperately trying to keep them out of court. Lawsuits are too expensive and rarely provide a lasting resolution of the dispute.
Instead of a partnership, I recommend that you form a limited liability company and transfer the property to the company. The LLC will need to have an Operating Agreement, and that agreement can cover all your management issues and questions. The main advantage of an LLC is that if something happens in connection with the property which threatens a lawsuit, only the LLC will be liable, unless one of you actively participated in the alleged wrongful conduct, and even then, only the owner/sister who participated will be at risk and not the other sister. As partners, you would each be liable for the other's bad acts in connection with the partnersip and the property. This is why most businesses are either corporations or limited liability companies.
There is no federal tax, but you will have to file both federal and state tax returns. The state imposes an $800.00 franchise fee, plus an LLC fee which does not start until you have gross revenues of more than $500,000.00 per year. We charge $1500.00 to set up a simple Operating Agreement where the owners share profits and distributions in proportion to their investments in the LLC, file the LLC-! Articles of Organization with the Secretary of State, and transfer one property into the name of the LLC.
Dana Sack
Answered on Nov 19th, 2015 at 9:33 AM