LLC or corporation?

When rehabbing houses, I will do everything in my own name because personal income tax is taxed at a lower rate than corporate income tax. Is there any liability for me when rehabbing houses? What if the roof isn’t repaired right and it kills someone? I don’t think this would actually happen, but should I incorporate to protect from lawsuits?

When home building, I know I should either incorporate or form an LLC. What are the specific liability issues that I might face? Is it the same things like a roof collapse?

If I ever get into apartment or hotel investing, should I form LLC’s or corporations? I would be the only owner either way. Both can be taxed like S-Corps. I don’t see a real difference. The only difference I see is the actual cost of annual reports. An LLC is $138.75 and a corporation is $150. So should I form an LLC so I can save $11.25/year? However, an LLC costs $100 to form and a corporation only $35 in Florida. So this would take me 5.77777 years to see this money back.

However, the cost of filing fees seems like a very arbitrary reason to decide which one to go with. What is better, in your opinion, and why?

LLC membership (In TX; your state may vary) is considered personal property. As such it is not available to a judgement creditor. So if you get sued because you hit a kid with your car, the most the creditor can get is a charging order against future distributions.

S-corp stock is considered an investment. Investments can be awarded to judgement creditors. Now the creditor owns the corporation that owns the property.

So while both an LLC and a corp protect you from corporate liability, only the LLC protects the entity from your personal liability.

Neither entity will protect you or the entity from your personal actions. If you mess up the roof and it collapses and kills someone, both you and the entity will be sued. Have good insurance.

Note that many states have been “piercing the veil” for corporations and LLC’s with a single owner. Best if you can have an additional member involved.

LLC it is.

But I’m not giving ownership to anyone. I don’t even know who that would be.


Redstar what Mark is saying is you need to select a partner in your LLC! It could be dad, mom, brother, sister, aunt, uncle, nephew, niece, cousin, sister in law, brother in law, grandma, grandpa, your girlfriend, your boyfriend, your wife, your wife's, your ex wife, your ex husband, your buddy from high school, your high school crush, the postman, the garbage man, the pool boy, the gardener, etc. 

Mark and I are not sharing sophisticated methods of partner / LLC Co Managing Partner so you give 10 units of ownership to ______________ and 10,000 units of ownership to Redstar, your both owners and both LLC Co Managing Partners! This way you are not single owner and not single manager!

Just make sure you indemnify the Co Managing Partners by the LLC.



What is the purpose of finding this partner exactly?


In most states lawsuits against owners of single entity (Single Owner) LLC's are breaking the corporate veil proving that the single owner and single manager are responsible for the decisions and actions of the LLC and equally liable under the law!

A second owner / second manager prevents a decision from being detrimental to owners made by a member of management!


So the purpose of finding a second owner to my LLC is so that

  1. if I get sued personally (if I run over a kid), it won’t affect my business?


  1. If my business builds a house and the roof collapses and kills someone, I don’t get sued personally?

I think it’s 2.

If I gave someone 1% ownership, would that take care of the problem?


Sincgle member piercing of corporate veil came about due to a Colorado case involving a doctor and his wife. For IRS and Court rules, MOST, members of your immediate family are consider as ONE.

The doctor and his wife committed some act against a tenant and the courts looked at the case and said, "OK you did it…AND…there is no one else to protect, so why should the courts grant you protection for an act that you committed…

What Mark and Gold River are trying to tell you is put someone, not a family member, in your LLC…for even a VERY MINOR piece of the action. You do not have tp give up everything…just a very small fraction…it is well worth it for the additional protection you wll gain.

You are stubborn as a GOAT…Got a HARD HEAD and STINKING BUTT.

If you set up your own LLC, and someone sues the LLC, you will also be sued personally. That is the way business litigation works. The Attorney sues everyone because at the start, he does not know who has liability, and because of the nature of LLCs. As the case proceeds, parties are dismissed who obviously have no liability. But you will be sued personally if you are operating under an LLC. That does not mean you will eventually be found liable. But it does mean that you will spend from $5,000 to $25,000 to deal with the situation.
No one wants to hear it, but the only real personal liability protection you have using a corporate entity is to set up a C Corporation and elect Sub-S status.
In 33 years of practicing law, I always refused to set up an LLC for a client, and lost business in doing so. The case law regarding LLCs is still being created. The case law regarding C Corporations has been settled for a long time. You know how the Courts will rule.
Find an older Attorney who knows how to draft an ironclad set of Articles of Incorporation/Organization and a set of Bylaws, get a corporate minute book, a set of stock certificates, and you can operate your business just like a sole proprietorship.
You will never be sued personally if the corporation is sued. An Attorney would be risking Rule 13 Sanctions in doing so.
LLCs, even if created by an Attorney, are a dangerous vehicle. Those created by someone with no legal training or experience checking a box on a website are a train wreck waiting to happen.
Spend the money, save the headache.