Who has an LLC?

Limited Liabilty, for me that spells it out. As you know RE is a risky business so you want to protect yourself as much as possible, also I believe you have some tax benefits?

When you have an LLC it is to protect assets that are in your name. With wholesaling, nothing goes into your name.

I invested in an LLC when I first started a couple of years ago (and in CA that is a VERY big chunk) and it was a waste so early in my career. And now that I have been in longer and have learned more, I have found that an S Corp would probably be the best way for me to go when things actually are moving along at a faster speed.

Don't rush into it.

Karen

I have an LLC and there are benefits to having it, but Karen is right. If you are just going to wholesale, then you are not going to put the property in the LLC. It limits your liability, but you are not holding the property so you don't worry about things like someone slipping and falling in the driveway of one of your properties and then suing you. The other part of it is that with a business entity, you are able to build business credit and do other things that you are limited to by not having the entity. It is good to have one, especially if the wholesale part of your business takes off and you then want to reinvest the profits. Then it could be a strong play. You could go Corp or LLC, but get with a good accountant and they can break down of the benefits.
Jeremy

Would there be any tax savings at the end of the year by having an LLC versus not having anything? I know that might be a question for an accountant but I would much rather keep more of my profits at the end of the day.

Also if I do not have an LLC or anything similar do I even technically count as an official business in the eyes of the government?

i formed a LLC in May & you are right Karen I could have waited because now I have to pay $800 here tax for just having an LLC whether youv'e made profit or not & I have not yet so that sucks but oh well I am working on my 1st deal and i just got the insiders elite so away we go off to make offers.

I have an LLC; I opened it (through Legalzoom ) when I first started my rei career per recommendtions from the Success Academy lessons...
Even though I live in Cali, I opened my LLC in Texas, where I have a property, because I am not doing any business in Cali and I didn't want to pay the $800 annual fee.
You can open your LLC in any state where you do business; just go to the website of Secretary of State and read what their requirements are; every state is different.
With the LLC I am able to deduct business expenses, and I have been building my business credit for almost two years; I now have two visa business credit cards, a Home Depot business card that has come in very handy for rehab material purchases, and a Staples business card that I use for my office supplies needs. So, even when my business cards have a high balance on them, it does not affect my personal credit
If you intend to buy and hold property soon, you should really consider opening a LLC; otherwise, you can wait until,you feel that you need it.

If you are thinking a LLC will open doors for bank loans, those days have long gone. Banks will still require a personal guarantee to secure funds along with a hefty 20%-30% downpayment. A good point here is if you have an LLC and a good RE accountant you will be able to produce quarterly P&L's and tax returns to your prospective lender. We just purchased another multi property last month through our LLC and it is still a paper nightmare.
My advise is to discuss this with a reputable accountant and go from there...Jan

Nik, you hit the nail on the head with your second post. There are absolutely tax savings by Wholesaling through your LLC. The CPA on my Power Team, whom I met through my local REI club and who invests in RE himself, strongly urges his clients to take the step and set up an LLC (particularly for wholesaling).

Per my CPA, *IF* you do this, really do this RE thing (i.e. not just a 'tire kicker'), without the benefit of an LLC the IRS will classify you as a "Dealer" for tax purposes upon your third (3rd) transaction in your own name or your sole proprietor dba. And the ramifications of being labeled a "Dealer" by the IRS can be significant.

Valerie you are right also. The Secretary of State's webpage for whichever State will have all of the information on forming an LLC and the fees. Once you have that info, then you will find many services that will complete and file the paperwork for you for a fee, + the Secretary of State registration fees.

I went through incfile.com {www.incfile.com} and my fees were about $49 + the $305 that Texas charges to register an LLC with the Secretary of State. It was worth the $49 to me the first time; maybe next time I will just do things myself.

I did get my EIN on my own; that was a very very simple process online at the IRS.gov website weekdays. You must FIRST get your entity (LLC or whatever); THEN your EIN (not the other way around).

Don't take my word for it; speak with your CPA (not just a bookkeeper, but a bona fide CPA) for his/her advice. If you don't have one, look for one at your local REI club as there are sure to be some involved with the other members and it is great to network with all of them!

Good luck.
--Walter

We have an LLC it also seperates your personal from your business incase you get sued or an accident ect. We used legalzoom.com in PA and they file everything for you with state, federal, ein, business name search and more for under $100.00 and fast also.

I'm sorry but I am a little confused I know thru the seminar I attended they talked about having a LLC but if I have this correct you are saying to do a S Corp instead. May I ask what is a S Corp and how do you go about getting one.

Liability protection and also to look more professional. The others and Jan summed up, so I really have nothing to ad than to say Hello to Jan! Haven't seen you around. Tammy

I started an LLC thinking I was going to take aof and make money. I haven't made any money yet. Should I keep my LLC or get rid of it till I make a deal? I do write off paper and mileage and such things.

Thanks
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Debbie

I read if you are doing assignments, you can grant a property if you have an LLC or a Trust? I know one thing, Our LLC, protects out ass......ets if someone wants to sue us.

Talk to your CPA about what he/she advises. Things are different from state to state.

I do not remember all the exact details from when we talked. I know that he said to use an LLC if my profits would be under $250K, but more than that that an S Corp would be better. Well, I am planning on taking it bigger than the $250K mark so I need to ck into this in more detail.

If you do have a lot of assets already then it IS a good idea to get something set up but, if not, until you do, you may not need one yet.

Again, talk to your CPA and see what he advises. That's why we pay them the big bucks!

Karen

Talk to the CPA on your Power Team, if you have one. If you don't yet have a CPA on your Power Team, look into it.

The "Dealership" status I was referring to (in my previous post) is a Federal IRS designation; not a state specific designation. Upon your 3rd 'deal' that you have sold (Wholesale or Retail) under your own individual name or your Sole Proprietor dba, the IRS will designate you as a "Dealer" for tax purposes (much like a used car or new car dealership). This designation has tax implications people!!!

Nothing wrong with a C - corp or an S - corp; they are great entities replete with their own Pros & Cons; and certainly have their place in the RE Investing world. Another author has some great info on this in his "You Can Choose to be Rich" series.

Another author I have read suggests doing a deal or two (2) in your own name (just to save money and to make sure you are going to actually do this); then after you have done a couple of deals forming an entity with the advice of your CPA or Tax Attorney. Probably excellent advice....doing a deal or 2 and then forming the appropriate entity.

To each of our continued success!
--Walter

There was a great point brought up in the thread. It is all about the CPA or Accountant. Find a good one, preferably one that invests in real estate. They will see things through the eyes of an investor. Also, if you have a business entity, rather it be a sole prop, LLC, SCorp, or other entity, then you will receive benefits tax wise for having the business. The entity types give you different advantages. And with the entities, there's certain things that you have to keep in mind. But I can not recommend enough getting a good CPA/Accountant. I was in banking for 10 years, and I can personally say from experience that all accountants are not created equally the same as all bankers are not created equally.
Jeremy

Teresa,

I wish I could take credit for that idea....but alas I stole that too from another very experienced well known RE Investor / Author. He is from the West Coast of Florida and has been earning a living from RE Investing for about 35+ years now.

His advice is to do 1 or 2 deals in your own name (Wholesale or Retail), and then if you really are going to continue to pursue RE Investing, THEN he suggests forming an 'entity' as either an LLC, S-corp or C-corp upon the advice of your Tax Attorney and/or CPA who is an investor themselves.

I formed my LLC a little earlier than I had planned, as it was a necessary step to gain access to one of Dean's vendors, Insider's Cash. Insider's Cash was the sole reason I went to Dean's 3-day RE Workshop in Boston this past June, as we were told that was the only way to gain access to this private money lender. Although the 3-day workshop was a very good refresher for me and basics of investing for my partner and nephew.

If you want or need to know this 2nd Author's name, PM me. To each of our continued success!
--Walter

If it is to be, it is up to me. -unk

Jay Mitton...google it

It is very important to have a LLC because it will help you in the long if you lease,rent also check DG.com for more information