LLC or no LLC?

Does everyone wholesale through a LLC or go the sole proprietor route?

First let me say that I don’t wholesale properties (I’ve bought properties from wholesalers) but I thought I’d chip in on the LLC or no LLC part.

LLC’s are great if you are holding a lot of properties for the long haul. They are not generally that good if you are generating earned income as you would be with wholesaling. A corp might be a better structure. You should talk to a CPA in your state for better advice as there are tax consequences that can be quite expensive if you choose the wrong structure.

I don’t know if you are just starting out. I’m kinda guessing you are and apologize if you aren’t. Lot’s of people go to these expensive seminars and boot camps where they wow you with the all of the things you should do to form your business. To be honest, it’s part of what sells the seminar. However, in reality, having a legal entity can be a waste of money if you haven’t completed any transactions. I like to tell people to wait until they have done several (6-10) deals before they spend any money on forming a legal entity.

When I first started out I created several of these structures and after paying for CPAs to do my taxes for each of them, decided I really didn’t need all of them. I spent a lot of money that I didn’t need to when I first got started and later closed most of them.

The deals I have seen wholesaled or bought from wholesalers, have been done using trusts. Trusts are cheap and easy to do and don’t require a corporate formation. You can assign the trust to your buyer and they can pay you directly. If you find that you are doing enough deals to warrant a legal entity structure, then your LLC/Corp can be included in your trust for legal protection. I’m assuming you aren’t taking title and that you’re just assigning your contract - so you can just write the contract in your personal name too as you won’t be on title.

Thanks for the info and I didn’t think about putting it in a trust. LLC is all the rage right now but it doesn’t seem to provide anymore than a sole proprietorship would unless set up right with meetings and so forth.