Topic: Who's Formed and LLC and running a team?

We have run almost 2 years now with a 5 member team splitting everything pretty much evenly amongst us. I somehow became team craptain, guessing because this whole thing was my idea. We have all been friends for well over 15 years, if not more.

Early season we will have a team meeting, decide on the goals, and budget for the truck and team.  I'll start a new spread sheet after every race, and pretty much account for every nut, bolt, registrations, etc...I normally layout all the funds and keep a running tally of who has paid, or not. By the time the race comes, everyone will have paid their part, usually. Race weekend the same thing will happen, new spread sheet, divide it up, pay by the end of the weekend.

So far it has worked out fine, no real issues.  But I have heard and seen some teams starting LLC's. Whats the reason for doing this? Any advantages?  What do other teams do for as far as running them?

1998 Ford Ranger 4.0 High Output
Organizers Choice Award Thompson Motor Speedway 2017
Class C Winners NHMS 2018
Hit'em With the Hein

Re: Who's Formed and LLC and running a team?

Accounting, mostly. Probably an amount of liability-limitation, assuming the team principals have assets worth protecting. This shit IS super friggin' dangerous, after all.

And depending on local law and a bunch of other variables, having some papers to wave around that says "I R A BUSINESS" sometimes enables certain transactions (auction purchases, B2B pricing on parts, gets the snotty junkyard in the next town over to return your damned phone calls, that sort of thing).

I've considered LLCifying, mostly because of the second paragraph, but the older I get and the more I appreciate my stuff the shinier that limited liability thing looks, too.

Driver, Pit Monkey, Rod Buster and Engine Fire Starter
Team FinalGear

3 (edited by TeamLemon-aid 2019-01-21 08:03 PM)

Re: Who's Formed and LLC and running a team?

We formed an LLC for a separate team with our non-Lemons car.  One of the guys on that team is very wealthy and a lawyer, and didn’t feel comfortable with exposure to liability.   It starts to get really dicey when you have discussions about liability for those that prep the car.  What if there is a mistake during prep that results in a car crash and someone gets hurt or worse?  There are tons of similar questions.

LemonAid - Changing kids lives one lap at a time.

4 (edited by Guildenstern 2019-01-22 12:55 AM)

Re: Who's Formed and LLC and running a team?

Although never assume an LLC protects you from anything you personally could have been negligent about. The Event Waiver is probably a more solid protection than an LLC since you could argue that it spells out explicitly how you could just die at any moment and so anything but gross negligence is just going to be an expected outcome of being at a track. And for gross negligence they just sue YOU not your LLC because You were the one negligent.

What LLC's are really great as is as an entity it can have its own checking account and credit card, and protects the holders from excessive debt collection since the LLC was the one being given the debt so only LLC assets can be taken unless you were doing something WILLFULLY dishonest in getting the loans etc...

That being said, once you're into multiple car teams and rotating team members, yea get an LLC just to save the insanity. It owns the cars, it owns the tools, it owns the massive credit card debt you'll inevitably have.

Mistake By The Lake Racing (MBTL)
88 Thunderbird "THUNDERBIRDS ARE GO!"
A&D: 2014 Sebrings at Sebring (NSF), 2014 NJMP2 Jurassic Park (SpeedyCop), 2012 Summit Point J30 (PiNuts)
2018 Route Sucky-Suck Rally Miata.

Re: Who's Formed and LLC and running a team?

It's much harder to embezzle money from the team if you form an LLC

"THE WONDERMENT CONSORTIUM"
Everything dies baby that's a fact,
But maybe everything that dies someday comes back?

Re: Who's Formed and LLC and running a team?

EyeMWing wrote:

This shit IS super friggin' dangerous, after all.

Agreed.  If by "this shit" you mean "driving to the track".

Re: Who's Formed and LLC and running a team?

Gotcha...I do like the idea of the LLC having the credit, and not me holding the debt.  Thanks for all the info.

1998 Ford Ranger 4.0 High Output
Organizers Choice Award Thompson Motor Speedway 2017
Class C Winners NHMS 2018
Hit'em With the Hein

8 (edited by gump 2019-01-23 01:08 PM)

Re: Who's Formed and LLC and running a team?

Be aware, with any entity, you pay to form the entity and annually to maintain the entity.  Here in California it is $800/yr.  Here is a table that gives the costs for all 50 states:

https://www.llcuniversity.com/llc-filing-fees-by-state/

Also, it is difficult to obtain credit for a brand new entity.  You will likely have to at the very least personally guarantee any credit you seek.

And for those of you in California thinking you'll form an AZ llc and avoid the CA minimum annual tax, think again.  Our friends in Sacramento are a step ahead of you.  It doesn't matter where you form your LLC.  If you use it in CA you pay the $800.

10x loser (Arse-Freeze '11 - Vodden '15) 1x WINNER! Arse-Freeze '14 in the Watermelon Volvo Wagon
Swedish Knievel Skycycle('90 Volvo 740 Wagon)

Re: Who's Formed and LLC and running a team?

People go into debt to go Lemons racing!? Now THAT's dangerous!! :-)

Re: Who's Formed and LLC and running a team?

Dudefladge wrote:

People go into debt to go Lemons racing!? Now THAT's dangerous!! :-)

Sure is, everyone should know that Lemons Racing is a Self-Deprecating Asset

On a serious note, A business that loses money == a hobby.
I have a lot of hobbies, can't deduct expenses with a hobby, but you can sometimes duck them.