Another newguy question, sorry. Why LLC? I’m looking into buying my first REI property to rehab, possibly rent out afterwards, should I LLC? If so, how would I go about that?
Just read Bill Bronchik - several arts on LLC and LP.
Do your own homework, I’m new to this and am finding that the same questions get asked over and over…look even in the previous posts - great posts. you can get some real good insight.
but check and recheck everything everyone says on here.
TMcG
I agree - research all the threads on the forum and especially utilize the search function. Most likely the same questions you have, have been answered previously. There is a wealth of knowledge available here with everyones contributions.
Why LLC? Asset protection
How? Many sites can help you out. Currently I am reading up on LLC/C-Corp/S-Corp online at legalzoom.com. Do a google search and I am sure you will find many companies that offer similar products.
Good Luck!
Howdy Mjws:
In Texas you can form a LLC on line for $200. Quick and easy and cheap. Asset protection for some extent but you will still have to sign personally on most loans that you obtain to buy property.
I believe the rates for entity creation across the board (i.e., LLC, S-corp, C-corp, LLP, etc.) went up by $100 starting this year in Texas, therefore, forming an LLC now costs you $300 (according to my CPA).
Asset protection.
Corporate stock is considered an “investment”. As such it is subject to be awarded to satisfy a judgement. In the event you are personally sued, this would leave your adversary owning the stock of your corporation and therefore all of its assets.
Member interest in an LLC is considered personal property. As such is cannot be awarded to satisfy a judgement.
Both a corporation and an LLC protect you from the company’s liabilities, but only the LLC protects the company from your personal liabilities.
You can choose to have your LLC taxed as a corporation, but still retain its character an an LLC. This preserves your tax preferences while providing the greater asset protection.
And the state fee in Tx is now $300. You will also need: management agreement, taxpayer Id number, tax elections.
Tedjr & NoMoneyDown,
What is the process for forming an LLC in texas? It seems here in NYS we have all sorts of paperwork and its MUCH more then $300.00 (unless i was given wrong information). Is it just as simple there as submitting online info?
Your best move is the LLC. The LLC provides the protection of a corporation, but is more like a partnership arrangement in many ways. LLC "members” (versus ‘share-holders’ or ‘partners’) participate in the day-to-day management of the company without incurring personal liability. All taxing agencies (state and federal) tend to “look through” the LLC to its members as the responsible parties in terms of accounting for, and payment of, income tax. Profits and losses relative to passive activities within the company flow to the members who remain free of individual self-employment tax.
Da Wiz
Is it just as simple there as submitting online info?
Pretty much. You have to get an authorized agent to do the actual submission to the state, but it only requires a single form and $300 (+ costs to the agent, if any). For an LLC, anyway.
Thank you all, including the private message recieved from M. D. which I haven’t figures out the whole messaging thing yet.
I read William Bronchick’s free article at legalwiz.com about LLC or S-corp/C-corp. If you plan to hold the properties long term, then u need to file LLC. If u plan to flip properties, file S-corp.
File C-corp if ur company has high profits.
I also read about asset protection from local investor club website and its content is very similar to W. Bronchick.
Now I have a questoin for Mark, CPA:
Do you recommend using do-it-yourself package to file LLC or S-Corp ?
Never heard of him. Bronchick apparently doesn’t know of what he speaks. And it looks like he hasn’t updated since 1999 tax law.
Since there is no tax code for “LLC” the IRS requires you to choose either individual or corporate taxation for your LLC. So, you can choose sole proprietor (disregarded entity), partnership, C-Corp or S-corp taxation for the LLC. This gives you whatever tax benefits you want to take advantage of and still have the asset protection of the LLC. It’s form 8832 in case you’re interested.
In short, having an LLC form allows you to take whatever tax stragegy makes most sense (corp, s-corp, whatever) and still gives you the superior asset protection of the LLC. You don’t need a completely different entity type.
And if this is the kind of advice you get, I’d certainly not suggest that you handle it yourself.
Excellent advice 