Entity question

Hi everyone! I want to form an LLC for my new wholesaling business and want to open up a bank account for it. My question is, my credit isn't great right now, and I know that banks are suddenly choosy about who they will open up a checking account with, let alone a business account. Does anyone have any idea if my credit will be a problem in opening up a new business account for this business? Thanks in advance! :cool:

Edited: 06/26/2010 at 08:05AM

Jeff and Cheray Warner

Real Estate Investor · Grants Pass, Oregon

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Icon_minipost Apr 29 '09, 12:11 PM

As long as your not on chex systems it should not be an issue to open an account. Poor credit should only affect your ability to get a loan.

Edited: 06/26/2010 at 08:05AM

Eliott G.

Real Estate Investor · Elgin, Illinois

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Icon_minipost Apr 29 '09, 01:54 PM

Joseph, once you form your LLC, go to a local Harris Bank...you will have no problems gettign your LLC checking account.

Edited: 06/26/2010 at 08:05AM

Joseph Ziolkowski

Inspector · Alsip, Illinois

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Icon_minipost Apr 30 '09, 05:04 AM

Great! Thanks guys I appreciate the input. Another entity question for ya... If I were to get my company set up as an LLC through an attorney and registered and all of that, would I also need to go to my county recorder and do the whole "operating under an assumed name" thing where I have to post the company name in 3 consecutive legal notices, or would the submission of the LLC be sufficient to have an up and running company?

Edited: 06/26/2010 at 08:06AM

Greg Boots

Real Estate Attorney · Seattle, Washington

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Icon_minipost May 06 '09, 07:58 AM

Joseph,

Since the LLC will be filed with and approved by Secretary of State you do not need to puclish notice.

Edited: 06/26/2010 at 08:09AM

Joseph Ziolkowski

Inspector · Alsip, Illinois

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Icon_minipost May 06 '09, 09:21 AM

Great Greg! Thanks so much for the info. It's reassuring to hear that from an attorney. Anyone know about how much it would cost to get one of those set up?
:cool:

Edited: 06/26/2010 at 08:09AM

Tony Severino

Real Estate Coach · Highland, Indiana

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Icon_minipost May 07 '09, 08:56 AM

In regarding multiple LLC's etc.

When we buy a property, it is titled into a Land Trust, and the trustee, (manager if you will) is an LLC. Since each property is owned by a separate trust, you are creating a few levels of asset protection.

1 Each asset is owned by an individual entity (separate trusts)

2 Finding who owns an LLC is pretty easy.. however finding who owns the trusts.. much more difficult.

3 One tax return.Much less lower tax bill.

One LLC, several trusts.

Just food for thought.

Tony Severino

Edited: 06/26/2010 at 08:10AM

Allen Bailey

Commercial Real Estate Broker · Memphis, Tennessee

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Icon_minipost May 07 '09, 11:24 AM

If you are doing wholesaling then you are going to be taxed as a real estate dealer. Due to the way dealers are taxed it is more likely your best tax benefit would be with a Corporation that elects subchapter s status. The reason for this is that wholesaling income is taxed as ordinary income and not long term capital gains.

So while it is possible to form an llc then elect to have it taxed as a corporation then elect to have that llc that is taxed as a corporation elect subchapter s status, you might want to start with a corporation.

Rather than explain why this is the case I am going to refer you to an excellent article by John Hyre that explains this concept that most investors do not understand. I have no relation to John Hyre except that enjoyed dinner with him a couple of times.

http://www.nwngroup.com/articles/jul05/you_dealing.pdf

Edited: 06/26/2010 at 08:10AM

Will Barnard

Rehabber · Santa Clarita, California

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Icon_minipost May 07 '09, 01:58 PM

I would be curious to hear what Greg thinks of this article posted by Allen:
http://www.nwngroup.com/articles/jul05/you_dealing.pdf

Edited: 06/26/2010 at 08:10AM

Will Barnard, Barnard Enterprises, Inc.
E-Mail: info@barnardenterprises.com
Website: http://www.barnardenterprises.com
info@barnardenterprises.com

Greg Boots

Real Estate Attorney · Seattle, Washington

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Icon_minipost May 11 '09, 01:39 AM

John Hyre's article is an excellent exploration into the different nuances that the IRS will look for on an audit in determining dealer status. Remember, the burden is upon you to prove that you are not a dealer.

I wrote a blog for the site a couple of months ago on the same topic:

http://www.biggerpockets.com/renewsblog/2009/03/04/wholesale-transactions-avoiding-dealer-classification/

However, my blog did not go into the depth as John did in his article.

Great post Allen, thanks.

Edited: 06/26/2010 at 08:11AM by Greg Boots

Aly L

Real Estate Investor · Middletown, New Jersey

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Icon_minipost Aug 03 '09, 05:36 AM

What are the implications of being a wholesaler *and* a licensed realtor? Are realtors able to receive assignment fees and/or just commissions?

I'm also an LLC. What should I be aware of to avoid any conflicts of interest with the realty company I'm licensed with? They are a large national chain. I'm brand spankin' new to wholesaling and am reading as much as possible. I haven't come across this topic yet.

Thanks!

Edited: 06/26/2010 at 09:13AM

Will Barnard

Rehabber · Santa Clarita, California

7238 posts
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Icon_minipost Aug 18 '09, 02:54 AM

Aly, great questions. In an attempt to revive thisa thread to get your questions answered, here is my post.
I am looking into the aspects of your question and will respond shortly.

Hopefully, so will others who know.

Edited: 06/26/2010 at 09:24AM

Will Barnard, Barnard Enterprises, Inc.
E-Mail: info@barnardenterprises.com
Website: http://www.barnardenterprises.com
info@barnardenterprises.com