BiggerPockets

I'm currently looking for my first flip and have received conflicting advice from some of the local investors I've spoken to. Some say it is better to get your feet wet and go through the first flip from start to finish before setting up an LLC while others say to set it up beforehand.

I will personally be investing $75K into the venture and my father is willing to invest an additional $100K in exchange for 30% of the profits.

I think we'd be better off getting the LLC taken care of before purchasing our first property in order to protect our personal assets, but others have said it isn't a big deal if we have insurance and use contracts to properly protect ourselves with contractors, etc.

I'd really like to hear the opinions of experienced BP members and I would appreciate any advice!

I started my LLC before I bought my first property just to give myself a layer of protection against personal liability. However, make sure you get good advice about how to operate your LLC, you want to make sure that you run it like a company or it can be pierced in a lawsuit.

I like Will am not an attorney so take my advice with a grain of salt.

Personally, I think you can make an argument either way, especially if you don't have many personal assets to protect should something go terribly wrong.

That said, I err on the side of others who have responded already, and would recommend taking the plunge to set up the LLC.

My brother will be purchasing his first rehab investment property next month, and my advice to him was to set up the LLC, meet briefly with an accountant and an attorney (just to have people to call in the case it's necessary) and apply for a business credit card and business bank account to ensure that he's segregating his money for better accountant and to support his future tax returns.

Thanks J Scott!

You make an excellent point about business credit and that is something I'm looking into as well. Do you have any suggestions on which business credit card(s) to apply for? I know Advanta was a good one but they went out of business.

The LLC also sets up an operating agreement. This agreement provides more than asset protection it also protects the members. It is also best to consider the many things that can happen ahead of time to limit the amount of grief that can come about when members later disagree with how a specific situation should be handled.

Sounds like you and your father are on very good terms, but business can have a way of putting strains out relationships and it is always good to minimize possible friction.

I just wanted to add my 2 cents in thanking everyone for the good advice. Can anyone make a recommendation for an REI savy person to help set up an inexspensive S-corp in the Seattle area?

Mod this extra post was due to a double bounce in submission so please delete this note and the previous note but please leave my original. Regards, Dave :mrgreen:

So if you were to buy the house via a conventional mortgage and put it in your name to achieve better financing, would you then deed it over to LLC before you flipped it?

I started my LLC before I closed on my first deal as well. The reason why I did so was because I knew that it was something that I was going to do sometime or another so I just got it out that way and it made me feel as if I have got a accomplishment out of the way.

NOW! Unless your judgment-proof (a.k.a broke) and plan to stay that way.