I get many opinions on these subjects. I’m currently looking for some reliable insite or direction to someone who can help me. I have two corporations I do business out of. I’m currently selling properties through a single member LLC in State of VA. that I’ll call Buy and Sell, LLC. I buy and sell out of Buy and Sell, LLC because I figure it offers me personal asset protection…Or should I have a LLC and couple it with insurance for extra protection? Also I’m a licensed contractor and run a full time crew with Contractor, LLC and prefer to write checks out of Buy and Sell, LLC so that when Contractor, LLC is audited for workmens comp. I don’t find out my contractors didn’t have it or dropped their coverage. Also, I feel if I pay my licensed electrician out of Buy and Sell, LLC instead of Contractor, LLC he’s a General and not a SubContractor. Correct??? I don’t know. Or should I eliminate Buy and Sell, LLC and start using Trusts again? Or should I use separate entities like I am now. Taxes- Should I keep using differenct corps for buying/selling and contracting or convert Contracting, LLC to S- Corp and have it be Single Member Manager of Buy and Sell, LLC? I’m also a licensed Real Estate Agent. I have a lot different ways that I can be liable…In short can anyone help me with ideas to reduce my potential liability with construction or house resales? Also, any ideas on how reduce my tax exposure?
The idea is to own nothing and control everything. With that in mind I would have an llc for each of your income streams and do not mix them as that pierces the protection that you are trying to set up. I would hold them in another llc with a trust as a 98% partner. With several layers it is harder to find but not impossible. Also look into a limited liability partnership. Your attorney should set these up for nominal fees . And a big insurance policy would not hurt if you can afford it.
A single member LLC doesn’t have full limited liability or any charging order protection. You are probably better off with just insurance or insurance with a stronger entity.
That is commingling and destroys any separation between the two. Substance is more important than form. You are the general unless the way you conduct business with your crew looks like you are not the general.
Sit with a qualified planner and tax expert to determine what is best for you. Your situation is more complicated than the typical investor and is not something you can do yourself.
With regard to liability, you are always personally responsible for everything you do. No amount of entities and structuring changes that. Managing each entity yourself binds them together, especially if you own everything.
buying and selling real estate are pretty low-risk ventures. Unless you are committing fraud.
which company writes the checks is irrelevant to the general/subcontractor question. It does, as BLL mentioned, involve comingling, which WILL mess up an audit. Rather than making the auditors go away, it will probably get them more involved in the inner working of all your businesses. It also creates negative asset protection issues, can have serious tax consequences, etc etc.
reducing liability and reducing taxes are two different concepts and often mutually exclusive. there is no entity that will magically reduce your taxes given the types of business you are in. Business expenses are, and have always been, fully deductible. what’s left over is income and it is taxed in pretty much the same fashion by the time it gets to you (the owner) in the form of cash you can use at the grocery store.
my reccomendation is to see if your state allows series LLC"s they are a single entity with different compartments- thus legally protecting one asset from another. I strongly advise against mixing funds from your LLC for other business interests until you check into the series LLC, most “pierceings” of LLC veils are on single member LLC’s. keep your liability policy at 1 milllion and obey the rules for single member LLC’s.
ask your mom or someone you trust to be a member with even a 1% ownership- this reduces the chance that the judge in a lawsuit will regard you and the LLC as the same entity if the insurance policy wont cover the incident…hope that helps.
Mom better provide capital, advice, or some other tangible contribution to justify her ownership interest or the judge can rule the set up invalid. Worst case is she can found to engage in a civil fraud and liable for damages.