I know that a single LLC does not provide much, if any, personal asset protection. It is my understanding that for real asset protection one would need multiple entities layered together(SMLLC managed by LP-very simple explanation but along those lines) and that that can get very expensive very quickly.
A single MEMBER LLC may not provide as much asset protection as a multi-member LLC. Layered entities may not provide any additional asset protection either. Nothing is absolute. Your individual circumstances, net worth, investment strategy, liability exposure, income tax liability, estate planning requirements, and business continuity needs are factors that will determine the entity structure that will work best for you.
If I professionally rehab a house(permits, builders risk, vacant dwelling, only deal with licensed & insured contractors and trades, etc.) is an entity really necessary for my first few deals?
My personal opinion is that you should not let the lack of a business entity keep you from doing deals. Many successful real estate entrepruneurs have operated as a sole proprietor and have never felt the need for a business entity.
At what point should one consider obtaining an entity/entities for asset protection: 1 rental, 10 rentals, $50K in a business account, $200K in a business account?
Please realize that a business entity does not protect the assets within the entity. If your business activity leads to a lawsuit, all the assets held by your entity are at risk. The business entity promoters push the concept that a business entity LIMITs your liability exposure to only the assets held by your entity and all your personally owned assets are shielded from liability exposure – hence the term: LIMITED LIABILITY COMPANY.
Now, the question to ask yourself is at what point will your personal net worth be great enough that you will want to incorporate a business entity? My personal financial planner tells me that a personal net worth of $2 million is my starting point. My attorney is telling me that liability insurance and a good umbrella policy are all I really need for asset protection, that a business entity is not needed if all I am looking for is asset protection.
Should I even bother to register with the county in which I rehab as DBA “REIClub Homes” or should I do it all in my own name? Is it safe to setup a business account in my own name or should I at least open an account under my DBA name?
Nothing prevents you from establishing a fictional business name (a DBA) for your sole proprietorship. If you are operating under a DBA, then you should have the name registered with your state to first make sure that no one else is using the same name, and, secondly, to prevent anyone else from infringing upon your “brand” identity. Yes, perfectly safe to operate as a DBA and do your banking under your own name , but if you have a DBA then set up your business checking account under your DBA to promote your business identity and to establish your “brand”.
Is a business account recommended to help keep personal and business expenses separate? (I have Between $15K-$20K startup capital)
If you are operating as a sole proprietor, either under your own name or under a DBA, then no real need to segregate personal and business bank accounts. You definitely want to keep a separate accounting of your personal and business expenses to make tax reporting easier. I think the DBA should have its own checking account so you can establish your business identity and more easily brand your business
Last question, I promise: How necessary is it to talk to a CPA before, or at least immediately after, my first deal? (definitely leaning towards yes on this one)
Necessary? I don’t know. Advisable, definitely if you are serious about your business. But don’t stop with a CPA. You will also want to include an attorney, your tax advisor, your financial planner, your estate planner, and probably your insurance agent in the discussions.
Just my 2 cents. Keep the change.