Legal Question in Real Estate Law in Washington

Re: how can I protect myself in a real estate transaction?

I would need more information to better determine how best to help you, but here, in the most general of terms, is my recommendation based upon what you wrote.

Assuming that you are each one-third partners, formation of a corporate entity may make very good sense for a number of reasons, including limiting your personal liability should tenants ever sue you for any reason, and also to protect you and your parents in the event of their divorce.

The idea would be that as shareholders in a corporation, the divorce would not necessarily affect the day to day operation of things, while also providing for an orderly process in the event that one or more shareholders wants out of the company. You would need provisions in the corporate by-laws that provide for what to do in the event one partner wants to cash in or sell the home when one or more of the other partners does not want to do so.

As far as getting a business license, I would need to know what city you plan to operate in because each city has its own rules to determine whether you need a license, however, as a general rule, I would say, yes, you should get a business license, especially considering the relatively small fee involved.

Keep in mind that you will also need to pay city and state taxes for the business as well. I recommend that you work with a good CPA, who can probably take care of all those issues for you at a reasonable cost.

When you rent the home, I also recommend that you have an attorney prepare a lease tailored to your home's specific needs. Most of the internet order form leases typically leave one or more provisions out, so that a situation that is particular to your property is not addressed until it is too late. Additionally, they almost never account for municipal laws that supplement the state laws that govern landlord-tenant relations.

I hope this explanation helps at least give you a general idea of what needs to be done. If you would like help forming the corporation, or with the preparation of a lease and instructions on what is required of you to comply with state and municipal codes when you rent the home, I can be of assistance in these areas.