RE Investing: LLC, C, or Self

[bsrsharma]

If you find an attorney’s big bucks intimidating at first, try http://www.nolo.com/ . It has a reputation for high quality at low price. You can even create a LLC online http://www.nolo.com/llc.cfm

[j]

There is not “double taxation” on an LLC, they are flow through conduits. But in California they add a $800 a year Franchise Tax bill plus any needed licenses.

[j]

There is not “double taxation” on an LLC, they are flow through conduits. But in California they add a $800 a year Franchise Tax bill plus any needed licenses.

[j]

There is not “double taxation” on an LLC, they are flow through conduits. But in California they add a $800 a year Franchise Tax bill plus any needed licenses.

[j]

There is not “double taxation” on an LLC, they are flow through conduits. But in California they add a $800 a year Franchise Tax bill plus any needed licenses.

[j]

There is not “double taxation” on an LLC, they are flow through conduits. But in California they add a $800 a year Franchise Tax bill plus any needed licenses.

[Shadowfax]

NOT GIVING LEGAL ADVICE, but…..

Most of what people have posted on here is correct. If you own more than just your own home in real estate–especially an investment property–you’d do well to put it in an LLC. LLCs are like corporations but with less “maintenance” and single-member LLCs are pretty easy and simple to form. They are designed to give the liability protection of a corporation but the tax treatment of a partnership. Nolo is a great do it yourself source, but if you are getting into large investment amounts, you should heed the advice to use a lawyer.

If you are investing with others, a lawyer will be essential as there are very tricky provisions that will need to be carefully thought out for tax purposes. Typically you form an LLC, get the loan (typically with personal guarantees from the members). You can also deed property you already own into an LLC but you’ll probably need to get consent of the bank for any already outstanding loans.

LLCs require very little record keeping (unlike corporations), there is no “corporate veil” aspect, and the taxation is flow-through. Single member LLCs can elect to be “disregarded entities” and piggyback on the individual. Nor do you have to have any actual employees–so you don’t have to pay payroll unless you do actually hire people through the business. Be careful in this area as well as “independent contractors” who look, smell and sound like employees will be deemed so and then you will have to treat them as such.

CA will soak you for $800 a year and you will still want to get insurance, etc for the property.
The benefit of having an LLC own the property is that any claims are limited to the investment and profits of the LLC. If that amounts to $50K,then that is all the plaintiff gets. They can’t go after your personal assets. Some investors even put each investment property into its own, separate LLC so that the liabilities of one property cannot be levied against the other(s).

Obviously there are lots of things to consider, so consult a lawyer if your situation warrants it.

Good luck!

[Shadowfax]

NOT GIVING LEGAL ADVICE, but…..

Most of what people have posted on here is correct. If you own more than just your own home in real estate–especially an investment property–you’d do well to put it in an LLC. LLCs are like corporations but with less “maintenance” and single-member LLCs are pretty easy and simple to form. They are designed to give the liability protection of a corporation but the tax treatment of a partnership. Nolo is a great do it yourself source, but if you are getting into large investment amounts, you should heed the advice to use a lawyer.

If you are investing with others, a lawyer will be essential as there are very tricky provisions that will need to be carefully thought out for tax purposes. Typically you form an LLC, get the loan (typically with personal guarantees from the members). You can also deed property you already own into an LLC but you’ll probably need to get consent of the bank for any already outstanding loans.

LLCs require very little record keeping (unlike corporations), there is no “corporate veil” aspect, and the taxation is flow-through. Single member LLCs can elect to be “disregarded entities” and piggyback on the individual. Nor do you have to have any actual employees–so you don’t have to pay payroll unless you do actually hire people through the business. Be careful in this area as well as “independent contractors” who look, smell and sound like employees will be deemed so and then you will have to treat them as such.

CA will soak you for $800 a year and you will still want to get insurance, etc for the property.
The benefit of having an LLC own the property is that any claims are limited to the investment and profits of the LLC. If that amounts to $50K,then that is all the plaintiff gets. They can’t go after your personal assets. Some investors even put each investment property into its own, separate LLC so that the liabilities of one property cannot be levied against the other(s).

Obviously there are lots of things to consider, so consult a lawyer if your situation warrants it.

Good luck!

[Shadowfax]

NOT GIVING LEGAL ADVICE, but…..

Most of what people have posted on here is correct. If you own more than just your own home in real estate–especially an investment property–you’d do well to put it in an LLC. LLCs are like corporations but with less “maintenance” and single-member LLCs are pretty easy and simple to form. They are designed to give the liability protection of a corporation but the tax treatment of a partnership. Nolo is a great do it yourself source, but if you are getting into large investment amounts, you should heed the advice to use a lawyer.

If you are investing with others, a lawyer will be essential as there are very tricky provisions that will need to be carefully thought out for tax purposes. Typically you form an LLC, get the loan (typically with personal guarantees from the members). You can also deed property you already own into an LLC but you’ll probably need to get consent of the bank for any already outstanding loans.

LLCs require very little record keeping (unlike corporations), there is no “corporate veil” aspect, and the taxation is flow-through. Single member LLCs can elect to be “disregarded entities” and piggyback on the individual. Nor do you have to have any actual employees–so you don’t have to pay payroll unless you do actually hire people through the business. Be careful in this area as well as “independent contractors” who look, smell and sound like employees will be deemed so and then you will have to treat them as such.

CA will soak you for $800 a year and you will still want to get insurance, etc for the property.
The benefit of having an LLC own the property is that any claims are limited to the investment and profits of the LLC. If that amounts to $50K,then that is all the plaintiff gets. They can’t go after your personal assets. Some investors even put each investment property into its own, separate LLC so that the liabilities of one property cannot be levied against the other(s).

Obviously there are lots of things to consider, so consult a lawyer if your situation warrants it.

Good luck!

[Shadowfax]

NOT GIVING LEGAL ADVICE, but…..

Most of what people have posted on here is correct. If you own more than just your own home in real estate–especially an investment property–you’d do well to put it in an LLC. LLCs are like corporations but with less “maintenance” and single-member LLCs are pretty easy and simple to form. They are designed to give the liability protection of a corporation but the tax treatment of a partnership. Nolo is a great do it yourself source, but if you are getting into large investment amounts, you should heed the advice to use a lawyer.

If you are investing with others, a lawyer will be essential as there are very tricky provisions that will need to be carefully thought out for tax purposes. Typically you form an LLC, get the loan (typically with personal guarantees from the members). You can also deed property you already own into an LLC but you’ll probably need to get consent of the bank for any already outstanding loans.

LLCs require very little record keeping (unlike corporations), there is no “corporate veil” aspect, and the taxation is flow-through. Single member LLCs can elect to be “disregarded entities” and piggyback on the individual. Nor do you have to have any actual employees–so you don’t have to pay payroll unless you do actually hire people through the business. Be careful in this area as well as “independent contractors” who look, smell and sound like employees will be deemed so and then you will have to treat them as such.

CA will soak you for $800 a year and you will still want to get insurance, etc for the property.
The benefit of having an LLC own the property is that any claims are limited to the investment and profits of the LLC. If that amounts to $50K,then that is all the plaintiff gets. They can’t go after your personal assets. Some investors even put each investment property into its own, separate LLC so that the liabilities of one property cannot be levied against the other(s).

Obviously there are lots of things to consider, so consult a lawyer if your situation warrants it.

Good luck!

[Shadowfax]

NOT GIVING LEGAL ADVICE, but…..

Most of what people have posted on here is correct. If you own more than just your own home in real estate–especially an investment property–you’d do well to put it in an LLC. LLCs are like corporations but with less “maintenance” and single-member LLCs are pretty easy and simple to form. They are designed to give the liability protection of a corporation but the tax treatment of a partnership. Nolo is a great do it yourself source, but if you are getting into large investment amounts, you should heed the advice to use a lawyer.

If you are investing with others, a lawyer will be essential as there are very tricky provisions that will need to be carefully thought out for tax purposes. Typically you form an LLC, get the loan (typically with personal guarantees from the members). You can also deed property you already own into an LLC but you’ll probably need to get consent of the bank for any already outstanding loans.

LLCs require very little record keeping (unlike corporations), there is no “corporate veil” aspect, and the taxation is flow-through. Single member LLCs can elect to be “disregarded entities” and piggyback on the individual. Nor do you have to have any actual employees–so you don’t have to pay payroll unless you do actually hire people through the business. Be careful in this area as well as “independent contractors” who look, smell and sound like employees will be deemed so and then you will have to treat them as such.

CA will soak you for $800 a year and you will still want to get insurance, etc for the property.
The benefit of having an LLC own the property is that any claims are limited to the investment and profits of the LLC. If that amounts to $50K,then that is all the plaintiff gets. They can’t go after your personal assets. Some investors even put each investment property into its own, separate LLC so that the liabilities of one property cannot be levied against the other(s).

Obviously there are lots of things to consider, so consult a lawyer if your situation warrants it.

Good luck!

[greekfire]

I concur with the previous posts and don’t have much else to add but this. A C-corp experiences double taxation and a sole proprietorship has little or no personal liability protection. When forming my own business, it came down to an S-corp or an LLC. I chose an LLC because it entailed less maintenance and provided me with personal liability protection.

I incorporated my LLC through the state of Nevada using LegalZoom. To me, Nevada seemed like one of the more business-friendly states and they said it was much more difficult to pierce the corporate veil. California apparently has a hard-on for sticking it to corporations, small or large.

I second Shadowfax’s recommendation to have a separate LLC for each property. 3245 Plaza Ct LLC, 12678 Bluff Canyon LLC, etc. I recall a foreclosure guru that this site has highlighted a while back recommending the same thing.

If you incorporate in Nevada you will have to pay an annual resident agent fee (~$150) for service of process unless you or someone you know lives there. You will also have to pay (if I recall) a $100-$125 per year to update your annual list of officer(s). Then there’s the $800 annual fee to the state of California.

There will also be a lot of record keeping if you plan on expanding on this model. You might want to consider setting up a separate bank account for each, unless they are to fall under an umbrella corporation. But I am sure this would entail a whole other set of circumstances.

[greekfire]

I concur with the previous posts and don’t have much else to add but this. A C-corp experiences double taxation and a sole proprietorship has little or no personal liability protection. When forming my own business, it came down to an S-corp or an LLC. I chose an LLC because it entailed less maintenance and provided me with personal liability protection.

I incorporated my LLC through the state of Nevada using LegalZoom. To me, Nevada seemed like one of the more business-friendly states and they said it was much more difficult to pierce the corporate veil. California apparently has a hard-on for sticking it to corporations, small or large.

I second Shadowfax’s recommendation to have a separate LLC for each property. 3245 Plaza Ct LLC, 12678 Bluff Canyon LLC, etc. I recall a foreclosure guru that this site has highlighted a while back recommending the same thing.

If you incorporate in Nevada you will have to pay an annual resident agent fee (~$150) for service of process unless you or someone you know lives there. You will also have to pay (if I recall) a $100-$125 per year to update your annual list of officer(s). Then there’s the $800 annual fee to the state of California.

There will also be a lot of record keeping if you plan on expanding on this model. You might want to consider setting up a separate bank account for each, unless they are to fall under an umbrella corporation. But I am sure this would entail a whole other set of circumstances.

[greekfire]

I concur with the previous posts and don’t have much else to add but this. A C-corp experiences double taxation and a sole proprietorship has little or no personal liability protection. When forming my own business, it came down to an S-corp or an LLC. I chose an LLC because it entailed less maintenance and provided me with personal liability protection.

I incorporated my LLC through the state of Nevada using LegalZoom. To me, Nevada seemed like one of the more business-friendly states and they said it was much more difficult to pierce the corporate veil. California apparently has a hard-on for sticking it to corporations, small or large.

I second Shadowfax’s recommendation to have a separate LLC for each property. 3245 Plaza Ct LLC, 12678 Bluff Canyon LLC, etc. I recall a foreclosure guru that this site has highlighted a while back recommending the same thing.

If you incorporate in Nevada you will have to pay an annual resident agent fee (~$150) for service of process unless you or someone you know lives there. You will also have to pay (if I recall) a $100-$125 per year to update your annual list of officer(s). Then there’s the $800 annual fee to the state of California.

There will also be a lot of record keeping if you plan on expanding on this model. You might want to consider setting up a separate bank account for each, unless they are to fall under an umbrella corporation. But I am sure this would entail a whole other set of circumstances.

[greekfire]

I concur with the previous posts and don’t have much else to add but this. A C-corp experiences double taxation and a sole proprietorship has little or no personal liability protection. When forming my own business, it came down to an S-corp or an LLC. I chose an LLC because it entailed less maintenance and provided me with personal liability protection.

I incorporated my LLC through the state of Nevada using LegalZoom. To me, Nevada seemed like one of the more business-friendly states and they said it was much more difficult to pierce the corporate veil. California apparently has a hard-on for sticking it to corporations, small or large.

I second Shadowfax’s recommendation to have a separate LLC for each property. 3245 Plaza Ct LLC, 12678 Bluff Canyon LLC, etc. I recall a foreclosure guru that this site has highlighted a while back recommending the same thing.

If you incorporate in Nevada you will have to pay an annual resident agent fee (~$150) for service of process unless you or someone you know lives there. You will also have to pay (if I recall) a $100-$125 per year to update your annual list of officer(s). Then there’s the $800 annual fee to the state of California.

There will also be a lot of record keeping if you plan on expanding on this model. You might want to consider setting up a separate bank account for each, unless they are to fall under an umbrella corporation. But I am sure this would entail a whole other set of circumstances.

[Author]

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