[re hustler i think ur ideas make sense let me ask u a question if i could im fairly new in te rei business world and am starting with limited money and credit issues, do u think its wise to form a llc right from the beginning even for doing lo’s and sub2 deals or to try and aquire hml for rehabs. any advice would be greatly appreciated]
CCC1,
If you have little money and bad credit, then the first thing you should do is work more hours; pay your bills; and repair your credit. Credit is a measure of financial trust. It will be VERY difficult to get a loan from anyone (including HMLs) if your credit is shot. I know that I would not loan money to anyone with bad credit!
Good Luck,
Mike
CCC1: Reply from Hustler.
Always use a LLC, always. The main advantage is that you can give it a distinctive name, its your name, and it protects you from the tax man and others in this sense.>
You get a tax assessment, your annoyed because its more than you owe, you go and see the Tax Man, who takes a personal dislike to you. If you are a LLC he will know that if he presses too hard you can go bust and walk away relatively clean and start up the next day without any interruption. And he will get nothing, so because you are an LLC he acts more reasonable and reduce his demands. Now if you are an individual he goes in for blackmail, he tell you he will take your house, seize your goods, freeze your bank account, what he’s saying is “We will ruin you personally” and they often do. With an LLC you are independant, as an sole trader individual your at his mercy. Lets add another scenario, the Tax man hates Jews, and your Jewish, the tax man hate Muslims and you just happen to be a Muslim, or he hates blacks and your Black. Try and remember Tax men and others are human and they have weaknesses and prejudices. So a LLC helps.
Lets say you are called Thomas Aloysius Errol, k/as Little Legs. Your not going to have much success with a name like that, so with an LLC you can call yourself; Land Securities Inc, The Hetty- Carnegie Corporation, Lombard Bank Acceptances, The Heslington Hills Housing Co-Operative. What matters is these names inspire confidence, confidence opens doors and obtains credit, and you look established. I made these name up, they are sample names only.
Now lets say you have a serious vehicle road accident, your the driver - and it can ruin you, but not touch your company. And vice versa. Another benefit is you can hide behind your company. Clients might not want to entrust their affairs to an individual, but will have no hesitation doing exactly that with a Corporation. So hide the fact your the boss, and its your company. This foxes them.
WHY AN LLC IS VALAUBLE AND A MUST.
Some of my posts suggests despondency and pessimism on my part. I readily admit that I am not a blue-skys-ahead for all poster. Please read this - then maybe you will know me better, [Here goes]>
Law 1. Whats not recognised in running a business is that 10% of your staff produce 40% of your headaches and problems. With todays labour laws getting rid of these people is difficult, time consuming and can be costly. One blessing is [thank-God] many of them leave of their own accord.
Law 2. Likewise 10% of your clients and investors produce 40% of your headaches and problems, and they are ungrateful for all you have done for them and are willing to do for them!
Law 3. Likewise 10% of your sales staff produce 40% of your orders and profit-streams.
Now heres the rub, when they become disgruntled and unhappy who do they blame? YOU. And what do disgrunted employees do, they become [i] narks [ii] informers [iii] whistle-blowers [iiii] pests and blackmailers. So to avoid this negative feedback and retaliation you must be super-clean [e.g always pay your staff and help] [keep legit accounts and books] and deal in a 3rd party manner with them by utilising a LLC to reduce your role in their DOWNFALL.
Always remember these Guys go home and have to explain they got fired and why, and in the 24 hours afterwards about 10% hatch an "I’ll get even with him/ her plans, so you need a buffer zone, an fall guy, and its the LLC Corporation that takes the heat. So be legit, be 100% and you can sleep night.
- I fired someone, he told his wife he hadn’t been paid, So I had a family delegation led by his-Mother-in Law at my door in a great temper. To diffuse the situation one of my Managers irresponsibly told the Mother in Law, he had 2 wives, 2 homes to keep, and thats why he never had no money to spare and was always claiming the firm had not paid him in full, or at all. Now can you see that murky water [that you never thought would ever happen]-under-the bridge scenario? So think ahead and remember the 10% = 40% headaches rule.