LLC or Corp

General Real Estate Investing
1

I live in Utah, and plan on getting a rental (and hopefully grow the one rental to several units).

I want to protect my personal assets and plan on forming a LLC or Corp. What are the pros and cons of each?

2

Spend the money on growing your business. You aren’t ready for an LLC, corp, or any other entity.

3

rkensparc - This topic has been discussed several times in the forum. If you browse through the threads or do a search you will find a ton of good information.

I agree with BLL that unless you spend the money to do it right your LLC may not protect you the way you might think/want.

Having said that - I did open a LLC for my business (I am starting a rental business). There were several reasons why I did it - the least important was to protect my personal assets. I am planning to protect my assets by getting a big liability insurance.

Again - do a search on this topic and spend some time reading the pros and cons listed. You will learn a lot.

Good luck!

4

concur with BLL, but if you’re going to do one, do LLC. Much more flexible form with less hassles…and no less protection.

5

I agree that its too soon for an LLC (I had the same question a while back). However, do you guys think that setting up an LLC primarily for finance purposes is a good idea? The way I understand it, you’ll have to personally guarantee the loans regardless. What would be the difference?

6

reasons for an entity:

  1. as part of an overall asset protection strategy
  2. if you are going to participate with others (partners, etc) it may be easier because it does not require a additional entity as GP, as would be required with an LP. Some states allow for limited partnerships without a general partner, but not all.
  3. over time you may be able to obtain business credit, but in the short term you will have to personally guarantee everything anyway.
  4. in some cases it may facilitate asset transfers whereby the entity could be sold rather than the owned property itself.
  5. may facilitate wealth transfers to heirs.
  6. certainly makes things easier in the event of a prenup/divorce where ownership has been/can be clearly identified.
  7. similarly, it makes things easier if a partner wants out or needs to be “kicked” out. right of first refusal, etc.

I may have overlooked some reasons, but everything else is basically guru sales-speak.

7

the one item I would add to mcwagner’s list is that the LLC helps me keep my finances and the business finances segregated. Without the LLC my wife and I would probably end up commingling funds and treat the LLC as our personal bank… :O) By having the LLC we will be able to better segregate our finances. I know it is more a psychological thing than anything else. But it helps…

Thanks.