Does anyone know of a site or lawyer that we can consult with and ask simple questions?
Post to this forum and others. Many times investors will know the answers to legal questions.
You need to be specific about the state. Laws vary by state.
Have you check with a local REI club? There will commonly be a lawyer there who can answer a simple question if it really is simple.
so you ask the lawyer “how much?”
he says “two fifty”
if you don’t blink he says “per hour”
if you still don’t blink he says “plus expenses”
:biggrin :biggrin :biggrin Funny, Mark!
I contacted the firm of a lawyer who has a couple of books, does seminars, and has an internet presence. He advises people to form their own business (for tax advantages), invest in real estate, incorporate (for asset protection), and do estate planning. (I don’t think I should give his/his firm’s name as that might violate forum rules.)
Anyway, a 45-minute phone consultation cost me $175 (I had to pre-pay $250 as a retainer). I didn’t speak to “the man,” but another attorney on his staff. Not knowing all the right questions to ask, I’m now not much clearer than before on whether or not I need an LLC for real estate. And of course I was pitched their “package services” – LLC paperwork, deed transfer, etc. – and guess what, they also have CPA services, too! While it would be nice to have one firm handling everything, it would also be expensive. With one little rental (so far) I think that peace of mind would cost too much.
And what I’m reading in this free forum is just as good (or better) than what the lawyer told me for $175.
- there are no tax advantages to forming a business entity. business expenses are always deductible, period. if an atty or cpa tells you otherwise, run as fast as you can the other way. odds are they are trying to sell you something. or they’re just lying or stupid. I’ve seen those too. (see 1b below)
1a. the one exception is that for a company that is spinning off huge amounts of cash, having an S-corp “may” save some self employment taxes. keep in mind that rental income is passive and not subject to self employment tax.
1b. making the wrong entity choice can cost you a ton of money in unnecessary taxes. I’m trying to fix one of these now for a new client.
- I’m curious how much they charge to set up an LLC for you. If it’s more than $250 plus state fees it’s a ripoff.
Most attorneys in this industry do not offer free consultations. Many CPAs do however.
Filing service companies are typically the most economical way to register a business and you can often speak with an experienced person who can answer most common questions (but not offer legal advice).
The legitimate reason for most entities is asset protection. If you manage your properties yourself and do some of your own maintenance; you are liable and the entity will not be able to protect you.
Good management practices and insurance will protect you.
Good management means you address maintenace issues quickly and have them repaired correctly by competent contractors.
I manage my own properties and GC some of my rehabs. I have a General liability policy for $1 million in liability coverage. This policy costs about $650/year. Once you have a GL policy you don’t need the liablility coverage on your rental insurance policies.
If you have a property management companies, and/or partners involved you want an entity to protect you and your partner’s assets.