Quite a difference between you have to have one, and, it is best to have one. Maybe even your tax guy will tell you that you don’t really need an EIN for your disregarded entity with no employees, if you ask the right question.
As I said before, the bank person is a low paid clerk who does not know any better. Your mistake was that you asked someone who was in no position to really know better. You could have just given your SSN and completed the rest of the application with no problem.
You have the number now, so you may as well keep it. Who knows, you may have employees one day and will really need it.
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this is another reason the bank wanted us to have one… we do land home pkgs with mfg. homes & should we need a loan, I don’t want to bother having accts with those banks that don’t do mfg. homes… I spoke with main commercial loan person & the new business accounts person at the 3 different banks, not some teller. We do want to get credit in LLC name on cards etc so guess I’m happy we did get the numbers
Boy, this site is a godsend!!! I learned that , yes, I need an ein for the newly formed LLC just recently set up with my 2 brothers (we’re all member). We’ll be purchasing property under the LLC.
But someone here mentioned that we should set up an LLC for each piece of property we purchase??
I think the main reason is asset protection. Unless you have a multi-million dollar apartment, I don’t think you don’t have to do it for each. Like myself, I just put my properties in one LLC. I really don’t own that much.
Also I also suggest for each property, a separate LLC.
I see this a lot so I ask this Question.
I live in Ca… What is the benefit of obtaining more then one LLC if each LLC is taxed $800 per year for having the “privilege of doing business in California.”
you can open LLC in other states, such as Delaware. It’s $200 per year.
Regarding EIN, I think it’s a good idea to get one. Some banks are asking for it. Some business clients may require it, plus security - it’s probably better to give out your LLC EIN then SSN.
Sooooooooo I am needing a little more education here,
At what point did you all decide you wanted to start an LLC? Just curious as to when that point comes. My plan is to be partnerless at this point, I have one rehab behind me and have been working on getting a rental or two under my belt. I just feel like I am a part-timer at this point but am hoping to get more full-time. I understand an LLC is for protecting yourself and your private property. I see the benefit as far as others looking more at your business in a professional way. I kind of get the tax thing-might need a little more education here. I am leaning towards starting an LLC but not sure if I need to. Any advice?
An LLC for holding your rental property is tax neutral. That is, your tax liability will be the same whether or not you have an LLC in place. The main advantage of the LLC is asset protection, not a tax benefit.
There are a lot of landlords in the country who operate as sole proprietors and have never had a problem. I believe that if you operate your rentals in a professional manner, maintain your property, and have adequate liability insurance, you should not really need to worry about establishing an LLC from the very beginning.
After you have acquired a few rental properties and have a large personal net worth, you may want to consider putting your property into an LLC.
I just went through all this, as I just set up my LLC in WI. My tax guy said get an EIN. When I looked at the application, you cannot put in an LLC as an entity (must be sole proprietorship, partnership, or cooperation). When I talked to my lawyer, he said I do not need an EIN and that when I set up my accounts at the bank that they could call my lawyer if they had any questions. The manager of my bank consulted with the manager of business operations for the whole state and he agreed with my lawyer. I talked to this business operations manager and he said that after 2 -3 years my company would have credit regardless of what no. it was under and I could get business loan then. So that’s the route I took.
As to multiple LLC’s, my lawyer said that he has a client that has about 25 rentals and has 4 LLC’s. This came in handy as he got sued from a tennant for quite a large amount.
I believe you need to call them and file the application over the phone. It takes about 10min to get EIN. What’s gonna take time is to change all this info in banks, etc… wherever you’ve used you SSN. So it’s s good ide to get EIN right from the start. It will save time in the future when you realy need EIN.
The only advantage to having multiple LLC’s is that the ‘pool’ of assets under each LLC is smaller thus if something happened that required your LLC to pay damages the assets for that LLC would include all of your properties if you only have one LLC versus only the one property if you had a different LLC for each one.
Personally, I think having a different LLC for each property adds an enormous amount of paperwork that provides a minimal amount of benefit. But that’s only my opinion.
You are misinterpreting the form. You must state whether your LLC will be treated for tax purposes as a sole proprietor, as a partnership, or as a corporation. If you elect corporation, the default is C-Corp.
When I talked to my lawyer, he said I do not need an EIN and that when I set up my accounts at the bank that they could call my lawyer if they had any questions. The manager of my bank consulted with the manager of business operations for the whole state and he agreed with my lawyer. I talked to this business operations manager and he said that after 2 -3 years my company would have credit regardless of what no. it was under and I could get business loan then. So that's the route I took.
At least you found bank employees who were willing to put in some time to research the question and confirm what we have been saying all along.
I see a potential pitfall with using your SSN for your business credit. Your personal credit report will be affected by all your business activity. A business failure could trash your personal credit score. I fthis could be an issue for you, then I suspect that you would want a separate tax id number for your business to segregate your business credit from your personal credit.
As to multiple LLC's, my lawyer said that he has a client that has about 25 rentals and has 4 LLC's. This came in handy as he got sued from a tennant for quite a large amount.
When you have a lot of eggs, you want to limit the number of eggs that can get broken if a basket gets dropped. Spreading your eggs among several baskets limits your risk of loss.
In other posts on this site, and in posts on other websites, John Hyre has always suggested that you limit the equity in your LLC to $250K. When you reach that limit, John suggests that you establish a new LLC for your next acquisitions.
Good points Dave and all. I will go over this info with my lawyer at our next meeting. The comment about the business and the risks involved affecting my credit report is something that I should have considered.