well, i’d go with mcwagner, basically for all that stuff, plus the free advise.
what is the point of the LLC?
to “hold” your properties?
think this through first. operating agreements come with your corporate record (in new york anyway). all sorts of forms come with the corporate record - but if you have no members/partners, no business objective, other than buy real estate to rent/sell, and you don’t actually treat the LLC as an OUTSIDE ENTITY, it’s useless and confusing.
Once the LLC purchases or takes ownership of anything, it is no longer yours, it is the property/inventory of LLC. That’s important. And it’s important that the LLC has beginning and ending balances, profits, losses etc. the weird thing about LLC’s is the whole pass-through taxation they offer.
Don’t forget, that with the LLC - and mark, correct me if i’m wrong - but if you are the Operator, Treasurer, and Secretary - you must be paid a salary for this, on top of your member allocations, or at least you should be…and for one glaring reason - businesses must know what to pay possible employees[themselves] (fixed costs) - in order to determine salability of business.
also, the point of any business, is to develop inventory and/or systems that let the owners/investors know that
- the business is profitable
- the business can be sold due to systems, property ownerships, contracts, customer base, R&D, inventory build-up etc.
I believe, that in order for an LLC to be valid - it must work to achieve the above, at the very least. if it is to simply “protect” you from law suits, that’s a weak defense for any legitimate negligence on your part as some schlubb, trying to pass off your properties as being owned by an LLC and therefore affording you, LIMITED LIABILITY.
It’s weak at best and the booming popularity of LLC’s with this goal in mind, may jeopardize the benefits of a “real” LLC entity, as Congress and lawmakers discover the seediness of rei. and i’m not saying that it is seedy or wrong for rei’s to do everything they can to protect their assets, but i just don’t think people, in general, are using LLC’s with the correct business mentality.
I am a member of an LLC. The LLC purchased its first property, under my management. I’m a member and an employee of the company. As a member - I provided funding through contribution and debt financing. Another member did the same thing. He is also the Secretary (employee).
Oh and Mark helped me understand the seperation piece of this.
but like i said, i still disagree on the whole “asset protection” thing - as being the sole reason for utilizing LLC. it just doesn’t make business sense.