Hi Jay, thanks for your response. You raise very valid points.

1. In so far as the non-producing searcher is concerned, the issue of productivity could be addressed in the management agreement of an LLC or By laws of a corporation. Possibly complaints resulting from their work could result in reducing the number of assignments given to them. Some of the title companies make this a condition in their agreements with independent searchers now. Perhaps something like this could be set up internally. With respect to the matter of profits, you are right that profits are dividended out to shareholders in corporations or paid out to members of an LLC. In most states however, the laws require that all debts of the corporation be paid first before there is a pay out to shareholders or members. Ideally the LLC or corporation could be structured in such a way as to assure that the funding covers only the expenses, or that any resulting profits be retained by the LLC or corporation for future growth and development with a possible reduction in future deuctions from assigned search fee paid by the searchers until exhausted. there are a number of ways that it can be structured. With respect to thie issue of taxes, As I recall LLC's are generally taxed as partnerships or sole proprietorships unless you request that the IRS tax it as a corporation. Corporations are doubly taxed by the IRS unles you file for subchapter S status. In any event if the LLC or corporation does not make any profits there are no taxes or possibly only minimal taxes to be paid. Right now the searchers are all paying their own taxes to the IRS. Their participation in the LLC or corporation does not change that. The LLC or corporation acts only as a cobduit to market the searchers skills and foward seach orders to him through as small a staff as possible of marketers and internal management whose duties amount to nothing more than selling the searvices and forwarding the orders for whatever services are needed.

2. Invoicing remains in the hands of the searchers. That does not change. Some of the title insurance companies up here does it that way. They place the order with the searcher. The searcher does the search and bills the party that ordered the search, appraisal or whatever directly. Any question s on the search or payment for the search re,main between the searcher, appraiser and the party ordering the services.


3. The pice adjustments for metro and rural areas are something that the markewters will deal with in packaging and selling the services. In terms of funding the LLC to keep it functional, those funds come from a minimal charge to be deducted from each search/appraisal/witness closing assigned out. As to how they bill the searchers,appraisers,attorney,notaries for this, one idea might be for each participating searcher,appraiser. attorney or notary to keep a small escrow fund with the LLC or corporation... For example a fund of $100.00.The LLC or corporation could bill each of the assigned give out to each of the escrow funds until exhausted, and thereafter the escrow fund would have to be replenished. This is only one idea. If you have something in mind, feel free to throw it in.

4. The LLC or corporation does not review the searches before they go out. That is left to the individual searchers. They currently do this, and that does not change. I think the individual searchers would prefer to do it this. The LLC or corporation may need to carry its own e& o insurance as well, and that is definitely something that would need to be explored. Remember also it may have no liability for assigning the work out. The participating members status a shareholder's does not in itself make them liable for a bad search. In performing the searches they may be construed as independent contractors, depending upon the law of the state in which they work. If that is the case the LLC or corporation is only liable to the extent that it did not assign the work to a qualified individual. However, the safest thing to do would be to have the LLC or corporation obtain its own insurance.

5. In so far as running the corporation is concerned, yes, you do need to have officers and directors. They can come from the ranks of the shareholders, but they do not have to. You elect them like you would in any corporation. You nominate directors and the sharholders vote them into office for whatever time provided in the by laws. In the case of an LLC you can address the same issues in the management agreement required by law.

I don't know did this address the questions sufficiently. If not let's talk some more, or if you have other ideas, that would be great too.



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