I desire to set up a compnay that engages in buying, selling, and wholesaling real estate.
But if I hold all my assets under 1 compnay name, wouldn’t this leave ALL my assets open to risk (i.e. if someone slips and falls outside of 1 apartment building when I own many)?
How could I set things up so that every piece of real estate I own is protected, but under 1 company name?
Follow sound business practices, treat people with respect, and carry adequate insurance. Judges and juries rule on how they feel and will twist the facts to reach the desired outcome. If they don’t like you, they will rule against you and it looks like you are up to no good when they see a convoluted set up of entities that you cannot explain.
thanks for the advice,
trust me, I’m not this kind of person. I just want to know if it makes sense to hold all my assets under 1 company name. that’s all. but i will take your advice.
adrian
You say that you want a business entity in which you are going to be buying and selling. If you are selling whatever you buy, then you are not holding any assets. Your entity is acting as a dealer to real estate.
If your real estate activity extends to holding real estate for the production of income, then this is another business purpose and should probably be conducted within a separate business entity so that your dealer activity does not “taint” your investment activity.
Tainting is an IRS issue and a reasonable business purpose to establish a separate business entity to conduct your investment activities. As a byproduct of a separate business entity, you should get some of the asset protection features you are looking for.
I didn’t mean to imply otherwise. The best way to protect assets is to avoid getting sued in the first and I provided the best way to do that. It doesn’t guarantee anything, but you are better off than the the guy trying to squeeze people or cutting corners.
Advice above is good. Entities are the last line of defense - useful & necessary, but BLL is especially correct to point out that a number of actions can reduce the chances that the entities will be necessary. Entities are a lot like life insurance - have them, try not to need them.
How you structure depends on facts that we do not have. As Dave T pointed out, one entity will do buy/sell. Depending on facts, such entity, in order of probability, should likley be: LP, S-corp, C-Corp.
Other businesses/assets should have their own entities - within reason. Rentals generally should be in LLC, sometimes in LP. Many people listen to the Nevada hucksters and form entities in Nevada - this is a waste of money for RE, as NV is very, very unlikely to apply to RE located outside of NV. Many people also try the “one property per LLC” model on the theory that LLC isolates all other properties from a lawsuit…that’s only true if a number of factors are worked out - including proper maintenance of LLC and adequate capitalization for each LLC - meaning that an LLC with little in the way of net assets can be pierced - that’s the problem with a one SMALL property per LLC…now one property per LLC makes more sense if the property in question is larger (e.g., a mobile home park, as opposed to a leveraged SFH) or has lots of equity (e.g. free & clear SFH).
Just some thoughts, most certainly not a comprehensive guide.