This doesn’t include the state filing fee.
I know it would be done right by this person, but is this fee completely outrageous?
That’s a pretty standard fee in Austin Tx where I practice. I do it for $300 + $300 filing fee but it’s mainly a marketing tool, because no lawyers makes any money forming LLCs. I honestly would rather not do the entity formation, because it takes more time than I can legitimately charge for.
I try to encourage people to do it themselves, especially if it’s a brand-new start-up with one shareholder/member. I have a little one-page how-to sheet that tells people step by step, it’s very easy to just file online with the Secretary of State.
Thanks. I’m feeling a bit frustrated because I went to see the lawyer and although he answered some questions I had, I’m still confused.
If you do it yourself can you create an operating agreement that holds up? I have no idea how to do that.
If 99% of lawyers can’t draft a solid operating agreement, there’s no way you can. All you are going to get with a DIY kit or cheap LLC is a cookie cutter agreement and you won’t know if it’s any good until you actually have a judgment and the creditor starts to collect. Think of it like a parchute. You only need when the plane is going to crash and you don’t know if it works until you pull the cord.
Here’s one problem I have seen in free and low costs LLC operating agreement. They require the LLC to make distributions whenever possible. That eliminates the charging order protection of the LLC. They also have weak provisions for a debtor member with a charging order.
Prices are relative. I know people that paid upwards of $100,000 to set up an LLC and that was a bargain. If you are unable or unwilling to pay for a qualified expert, you probably don’t need the service.
Thanks…can I just pay once to have a pro do it and then copy what they did for each additional LLC I create later on?
I don’t understand why you say 99% can’t do it. That’s a basic thing they should know how to do correctly.
It’s not a basic thing. Everyone does it because the gurus have scared every one into thinking they need one and it’s easy money. They sell one document to thousands of people.
There is no asset protection course in law school and that is what a good LLC agreement does. AP is a mixture of debtor/creditor law, bankruptcy law, tax law, estate and trust law, business and succession planning. corporate governance, pension and benefit law, insurance law probably a bunch of other areas I have missed, along with a large dose of actual courtroom litigation. Don’t forget the need to keep up with current case law. There are a few cases that changed the way people do things, but there are still some who push stuff that just doesn’t work anymore. On top of all that, every state has its own laws with regard to exempt assets and limited liability. There is no one person that has all that knowledge and experience. It takes a team to devise a solid plan.
There are about a dozen or so attorneys in the US that have more than a basic understanding of the issues involved. However, you can use a low cost agreement to run your business. Just don’t expect to survive a determined creditor.
You can as long as the LLC has the same structure and business of the original. An LLC for family members running a family business is going to be very different from an LLC with partners renting property, which is going to be very different from family and partners running a fix and flip business. An LLC is a tool, not a single solution and you need to think in terms of this affects everything else in your family and business lives.
Thanks. I did go to see someone who knows what they’re doing and I got the impression he is not that interested in working with me, for the reasons DrewShirley stated–it’s not worth his time for the amount of money and work. I really don’t know what to do next, go to the yellow pages to find another lawyer? I got as far as I could reading this forum and 2 books. I thought visiting a lawyer would resolve things. But now I’m back to square one, only a little more knowledgeable than I was before. I now understand why some people just say screw it and hold the properties in their own name.
Google the name Ryan Fowler. He is not an attorney, but he is knowledgeable in the area of AP and his web site has good educational material. If he can’t help you, he could be in touch with someone who can.
Thanks, I’ll check that out.
The state forms for registering the LLC are basic. You can fill that out yourself like Drew said.
That is 5% of the work. The value of an LLC is the operating agreement. An LLC with a poorly drafted agreement has an extremely limited value. FWIW, I have seen people fill out the form incorrectly and got whacked later when something happened.
On this and some other threads, BLL talks a lot about theoretical risks. Yes, an S-corp is vulnerable to a charging order. Yes, sometimes corporate entities get pierced.
But it is patently absurd to suggest there are only 12 attorneys in the US who understand asset protection. And he completely ignores the practicalities of the situation, namely, what’s so critical about asset protection if you don’t have any assets?!? Most beginning real investors are broke - they are what we lawyers call “judgment proof.” No one is going to sue you if you don’t have any money!
Yes, LLCs protect you against personal liability. Hooray - if you have no personal wealth, that also protects you from personal liability. And if all your wealth is in the LLC, and the LLC gets sued, then you lose all your wealth.
Beginners should worry about keeping their costs low and making offers, and not worry so much about asset protection. Once you’re making some decent money, then worrying about asset protection.
If you buy a house, get some good casualty insurance and tack on $300/500k in liability insurance. Or get an umbrella policy. Insuring your assets themselves is a much smarter use of your dollars when you are starting out.
Besides, if you’re dealing with banks, they won’t lend to your LLC anyway, so it doesn’t do much good to have one.
And just remember that all the gloom and doom scenarios that BLL keeps bringing up are incredibly unlikely to happen. If you’re a real estate investor, you should think about managing risk - don’t put all your energy into worrying about risks that are remote at best.
The #1 question I get from real estate investors involves fear about violating the due on sale clause, when in fact the risk of a lender calling a note because of a DOSC violation is virtually nil. The risk of you getting sued before you have any money is similarly remote.
I said there are only a few that have more than a basic understanding. Many understand on the big view, but very few actually understand the intricacies involved with advanced planning. Gurus have done a good job scaring the public and many unqualified people, both attorneys and non-attorneys, have entered the field for the easy money.
I agree with you completely and have said many times on this board. The typical investor doesn’t need any type of complicated AP planning because there is nothing to protect. Insurance and good business practices are all the protection they need. Taxes destroy more wealth than lawsuits and investors are better off minimizing taxes and expenses than worrying about getting sued. Even if an investor finds himself on the losing side of lawsuit, there is a good change the plaintiff will settle for the insurance limits before trial.
Understood. I was just stating the form to file the Articles of Organization is usually pretty basic and H&B could do that himself if he wanted.
Are you saying in the beginning you won’t get a bank to lend to the LLC without a personal guarantee or that a bank won’t lend to an LLC at all? We do all our mortgages in the name of the LLC, but we have to personally guarantee the loan too at this point since the LLC is relatively new.
Yes, I mean that the banks will require either refuse to lend to the LLC or require a personal guaranty.
The main purpose of including an operating agreement in a single member LLC is to bolster the idea that you’re not just using the LLC as your alter ego, correct?
There is already precedent to liquidate a single member LLC and it only takes an $11,000 judgment to do it. The operating agreement has nothing to do with it.
This might be a dumb question, but what does the operating agreement accomplish in a single member LLC, since it’s only one person?