From DBA to Entity(ies)

[KaosProperties]

Hi everyone!

As a moderator for Magic Bullets, I truly appreciate what great job you all are doing in this Discussion Forum!

I’ll keep my question(s) as brief as possible…

Hubby and I own five units (rental properties). We have been doing DBA since year 2000.

Now, we have children and I’m a stay at home Mom hence concern about protecting our properties, providing educational funds, develop IRA type (especially for me).

We do plan on purchasing more properties as well as Lonnie Deals, Notes, tax liens and such. A little of things until we know what we like to do more on.

In the meantime, how best to convert our current properties from DBA to entity(ies)?
Based on my research, this is what I have come to the conclusions:

1. Quitclaim to Land Trust for each properties.
2. Develop LLC for each properties
3. Develop C-Corp as managed manager

For additional info—we are located in Springfield Illinois. It has been really tough finding a good AP planner, RE attorney who is well informed on AP and CPA.

DIY is questionable to me because I’d like to ask questions as needed, in order to run the entity(ies) properly.

I have thought of hiring John Hyre, but am not certain that he is license in the state of Illinois.

Advice? Suggestion? Comments?

Thanx for listening to me.
Debbie

[mcwagner]

1. quitclaim doesn’t transfer anything. you need a general or warranty deed to transfer property.
2. putting the properties into a trust gives you anonymity, but gives you no tax advantages unless you have an entity as beneficiary. If you’re going to have an entity, might as well just deed the properties to the LLC directly and avoid the trust hassles.
3. LLC is preferred to a true corporation of any type, regardless of role.
4. However, you can choose to tax the LLC as a corp or S-corp if this achieves your tax strategy better than taxing it as a partnership or disregarded entity. LLC taxation is very flexible.
5. one property per LLC is, of course, the “safest” strategy since each property would be protected from liabilities arising at the other properties. But this comes with both a financial cost and a hassle “cost.” you have to make your own cost/benefit decision.

[KaosProperties]

See my response to McWagner’s comments…

@mcwagner

1. quitclaim doesn’t transfer anything. you need a general or warranty deed to transfer property.

My apology…I meant to say warranty deed.

2. putting the properties into a trust gives you anonymity, but gives you no tax advantages unless you have an entity as beneficiary. If you’re going to have an entity, might as well just deed the properties to the LLC directly and avoid the trust hassles.

I acknowledge that the Land Trust does nothing but to provide anonimity.

I have thoughts to use the LLC as a beneficiary to the Land Trust for each properties.

Question: why avoid Land Trust?
Am I mistaken that can help with the anonimity as well as avoid DOSC? I acknowledge lenders generally do not use DOSC but that could change anytime in the future.

3. LLC is preferred to a true corporation of any type, regardless of role.

Are you saying that instead of C-Corp, a LLC (manager managed) be the dominant over the other LLCs?

4. However, you can choose to tax the LLC as a corp or S-corp if this achieves your tax strategy better than taxing it as a partnership or disregarded entity. LLC taxation is very flexible.

Would this specific “dominant” LLC have the same as C-corp when it comes to Self Direct IRA, 401K, Educational, Medical, etc benefits?

5. one property per LLC is, of course, the “safest” strategy since each property would be protected from liabilities arising at the other properties. But this comes with both a financial cost and a hassle “cost.” you have to make your own cost/benefit decision.

I understand #5 response without a question

Thank you for your response as well as your upcoming responses. ;D

Debbie

[mcwagner]

2. I have never seen a lender call a performing loan for doing this.

3. yes

4. yes. an LLC taxed as a C-corp IS a C-corp to the IRS, and is entitled to all the benefits and limitations of a “true” C-corp.