Opinions on a partnership shop

[WillisXJ]

I was going to build a stick built garage on my property, but my wife brought up a great point about building an off-site shop. This would give me a larger space for about the same money. I'd be going in with my sister & bro-in-law who owns a house refurbishing/insulation company he runs out of his house, and my dad and grandpa who have boats to store and work on. We'd build a 40x120 GenSteel building and divide it into 3rds giving us each a 40x40 space. The land would need to be purchased, $40k, building with shipping from CA would be about $40k, and I figure another $40k to do slab, erection (we'd be doing most) wiring etc ought to cover it. Each 1/3 would have it's own utilities hooked up.

Big concern is the complexity of a partnership like this. I already figure we'd have to form an LLC to protect the building if one party were to get sued or assets were seized, the building would be protected.

I'm looking for more information on things we might be overlooking, and how complex things might get. What kind of tax issues can/will we run into (I know every state is different). I know people always say don't go in with family, but we are a really close family, and this is very cut and dry. It's not like we're in business together, just owning a building/land together.

I figure someone here may have run into the same thing or have a similar setup.

Thanks,
Steve

[roverjohn]

Originally Posted by WillisXJ

Big concern is the complexity of a partnership like this.

I'm looking for more information on things we might be overlooking, and how complex things might get. What kind of tax issues can/will we run into (I know every state is different). I know people always say don't go in with family, but we are a really close family, and this is very cut and dry. It's not like we're in business together, just owning a building/land together.

I figure someone here may have run into the same thing or have a similar setup.

Thanks,
Steve

I don't care how close your family is it will become less close when you start integrating your financial resources. Your gramp will eventually borrow a tool and loose it or your brother in law will hire a loser who will steal something belonging to another family member. One of your friends will eventually look at you sister's 16yo daughter the wrong way. Way easier to keep your shop space separate where you can watch your own stuff and be responsible for it. Plus, if times change and you want to move to a nicer home you don't have those ties forcing you to put anything ahead of you, your wife, and your kids. Plus, how compatible are metal fabbing and boat storage?
John...

[bgaidan]

If you're making 3 completely divided shops with no interaction between them you'll be much better off. If you're talking about one big open building and sharing the space, forget it.

[rock mafia]

Originally Posted by roverjohn

I don't care how close your family is it will become less close when you start integrating your financial resources. Your gramp will eventually borrow a tool and loose it or your brother in law will hire a loser who will steal something belonging to another family member. One of your friends will eventually look at you sister's 16yo daughter the wrong way. Way easier to keep your shop space separate where you can watch your own stuff and be responsible for it. Plus, if times change and you want to move to a nicer home you don't have those ties forcing you to put anything ahead of you, your wife, and your kids. Plus, how compatible are metal fabbing and boat storage?
John...

I'm gonna have to 2nd this. I get along great with my parents and inlaws, but I'd steer clear of this. It may work out fine, but it would suck to have problems that mess up a good family relationship.

There are plenty of stories of similar situations going sour. Friends and family seem to screw you the hardest and fastest when things don't work out.

[fj40guy]

Nice thing about my shop, it is 50' from my back door.

Even is the shop is only 3 miles away, there is still time going back and forth. Those tools you need around home, you need to duplicate to make sure that Saturday Plumbing job is taken care off.

Wrenching and needing tools in two locations at once is a pain.

(Meanwhile find a good place to invest the $40K at 8% interest.... )

[PTSchram]

I had a shop 0.8 miles from home. It was a huge PITA to go back and forth.

My new shop is a coupla steps from the home.

Build at home!

If you must do this, form a corporation to manage the building. Each unit must be stand-alone. Plan for the family to fall apart and if it doesn't, consider yourself lucky! I am not in business with anyone I don't sleep with

[Jeep07]

Do it at home. I thought about a shop further away but the conveniences changed my mind alone.

If you do it make sure its 3 totally separated areas and your tools are left in your area etc.

You also have to consider insurance etc.. Maybe one should buy/build and the rest lease/rent?

[jpcjguy]

Originally Posted by Jeep07

Maybe one should buy/build and the rest lease/rent?

Yea, so you are the loan and then family members "forget" to pay rent or tell you they will "get you later" and it is your credit on the line....and have fun on getting family evicted out of the space for not paying their share - that will go over REAL well around the holidays...

[WillisXJ]

The building would be 3 completely separate sections with their own entry. Boat storage, metal fab etc would be completely separate. The site I was looking at I can see from my house. I could hit a 9 iron and land it on the grass there. Yes, still makes for a PITA to get tools for house jobs. My wife owns her own business, so basically we are stuck here, like it or not.

I did just come back from the city and talked to the planner/engineer. He says since it's zoned C-1, a retail space must be on site. If my Brother-in-law were to concider thats where his business is based from, that would take care of that. However, there are other conciderations to think of, like to be out of the flood plain, we must build the land up 36" or have the building flood-proofed to 36" (how do you flood-proof a garage door?). The other concideration is that we'd need 1 handicaped parking spot that must be close to the front door and located on flat ground (might be hard if we have to build up the property). Might not work. I'll talk to them tonight, see how serious they are.

By the sounds of it, everyone thinks this is not the best idea. It really came about because if I build my 30x40 garage on my property, it will block the sun to my neighbors patio almost 100% in the summer. They are patio people, and we've known them for many, many years. His daughter was in my class, his other daughter in my sister's class (best friends), and he was my 4th grade teacher. I know it's my property and I can do with what I please, but I really don't want any bad blood.

[DUG]

Sounds like a bad dream waiting to happen; even with a contract.

[SPEEDCRAVIN]

Hell family are the last I would trust. i say get the loan to do it all yourself and rent the other 2 sections to them using a contract with easy outs. Set it up so you aren't rapping the family with rent but payiing the bills... Kick thier ass to the curb when the time comes


JOSH

[tortis]

no way in hell. nobody screws you like family.

[roverjohn]

Why can't you have three separate deeds for the spaces and then logically just get three separate locations which better suit your individual needs. It sounds like you are closest so likely it will fall on you to act as the night watchman when your partner's alarms goes off. Before you assume that things won't change in the future, like your's or your wife's employment, remember what making assumptions does to you and me. Hopefully it will work out.

[PTSchram]

Originally Posted by roverjohn

Why can't you have three separate deeds for the spaces

Zoning! They would each have to be retail.

The issue with shading the patio could be a problem as the neighbor could easily argue diminution of property value and could block the building/location improvement/occupancy permit.

BTDT! If you don't satisfy all the requirements, you ain't gonna build. This is why I moved to a place with an acceptable building on-site.

[CJeep77]

Originally Posted by WillisXJ

I was going to build a stick built garage on my property, but my wife brought up a great point about building an off-site shop. This would give me a larger space for about the same money. I'd be going in with my sister & bro-in-law who owns a house refurbishing/insulation company he runs out of his house, and my dad and grandpa who have boats to store and work on. We'd build a 40x120 GenSteel building and divide it into 3rds giving us each a 40x40 space. The land would need to be purchased, $40k, building with shipping from CA would be about $40k, and I figure another $40k to do slab, erection (we'd be doing most) wiring etc ought to cover it. Each 1/3 would have it's own utilities hooked up.

IMHO, your estimates seem low to me....Wouldn't you need water and a shitter? Permits, water and sewer tap, 3 electric taps......I would make sure you all are in agreement with splitting the extra costs it will most likely take to get it completed once it is underway.

If you personally know all parties are responsible people, it could work out fine.

[Jeepermat]

Originally Posted by tortis

no way in hell. nobody screws you like family.

Yep, I wouldnt partner up on something like this with anyone, family being the last.
It will turn into a clusterfuck.

[TLCObsession]

One of my friends did that here in WA. They built a 6 stall pole building. They formed a company to hold the building and the land, and each stall is 1 share. They pay a monthly fee that goes to an escrow account for taxes and future repairs and improvements. The building itself is insured thru the company and each of the partners is responsible for insuring their own contents. Its only been up 4 months, but it looks like it will work well.

The partners have a buy/sell agreement as well- right of first refusal with a shotgun clause.

[jnutter]

There's a lot of things you will learn about your family when money is involved.

Very few of those things will be things you wanted to learn.

[hickfab]

Originally Posted by jnutter

There's a lot of things you will learn about your family when money is involved.

Very few of those things will be things you wanted to learn.

Amen to that brother, familys are fine just wait until some rich parent dies then the true character comes out.


The only ship that won't sail is a partnership.

[R290]

Originally Posted by WillisXJ

TEdit..
I did just come back from the city and talked to the planner/engineer. He says since it's zoned C-1, a retail space must be on site. If my Brother-in-law were to concider thats where his business is based from, that would take care of that. However, there are other conciderations to think of, like to be out of the flood plain, we must build the land up 36" or have the building flood-proofed to 36" (how do you flood-proof a garage door?). The other concideration is that we'd need 1 handicaped parking spot that must be close to the front door and located on flat ground (might be hard if we have to build up the property). Might not work. I'll talk to them tonight, see how serious they are.
.

lots of fill dirt and a concrete slab with post holes going back down to grade or other engineering solutions.
handicap ramp can be used to help you with access into the building too.
it's all do able, but everyone need to going into to this with the ablity to rent out their space if needed.

[romoranger]

this will not work. Someone, or something (such as a company) will need to own the property. Considering that your brother-in-law has a refurbishing company do not put him anywhere near the title's property. If he was to go bankrupt or be sued it all could get taken away. The next problem is once you can figure out who will own the property is what happens if said person can not make the payments anymore. If you can overcome this obstacle, next it would be what happens to posession of the property if the said owner of the property becomes disabled/diseased. I have heard of many companies/partnerships going way south because of party involved became disabled/diseased and the way who inherited the said share destroyed everything (and they do have the ability to).

If you can figure out the posession of the property, then what happens to a portion of the building when one of its "tenants" becomes disabled/deceased. Will the inherited decide to rent it out? Or maybe if there is a co-ownership of the building will they sell their share? Or will they neglect it? Another question not related to these is what happens if something breaks? Maybe right now you guys can do all the work, but will you be willing to fix it if the neglect of the deadbeat inheritee caused the breakage, or if they refuse to chip in money for the repair? What if the commercial entity on site closes/bankrupts and there is no retailer on site? problems with the city?
Following the same though here what happens it one of the tenants is sued or goes bankrupt, or is accused of a crime. Typically what I would expect is that posessions are seized, and there is a chance the building could go with it depending on the titling.

I can think of many other very complex situations here. Ultimately, the best way to do this is one party purchase and own everything. This party would be responsible for maintaining the property and leasing the spaces under a contract.

My recommendation: build your shop on your property.