LLC vs. Corporation?

by forming an LLC instead of a corporation, you get all the benefits of forming a corporation but you avoid a few drawbacks that you would run into if you formed a corporation. Specifically, when you form a corporation, you subject yourself to double taxation and excessive paperwork. Both of those annoyances can be avoided if you form an LLC.

How do LLCs work? The LLC allows for multiple owners, or members. Additionally, there is a managing member, who also enjoys the rewards of limited liability and is typically the person responsible for managing the business. (However, if the LLC has just one owner, it will be taxed as a sole proprietorship.)

hope all this helps.
http://www.corporate.com/realEstateCase7.jsp

http://www.corporate.com/real-estate-faq.jsp

here are some other links.

Edited: 06/26/2010 at 03:04AM

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Icon_minipost Aug 31 '06, 07:21 AM

Understood.

Thanks for your help!

Edited: 06/26/2010 at 03:04AM

Michael Sherwood

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Icon_minipost Aug 31 '06, 07:50 AM

no problem :lol: I am glad I could help you out.

Edited: 06/26/2010 at 03:04AM

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Icon_minipost Aug 31 '06, 08:39 AM

Just to throw my 2 cents in.. You do not get all the benefits as you would a corportation. You do get asset protection much the same as you would with a corporation, but the there are many benefits of a corporation. Generally speaking is a Corporation best for a property owner? NO. But all business entities have their own advantages. An LLC has the lease regulations, and requirments. It is most likely your best bet. A good rule of thumb is to keep about 3 properties or so in each LLC. The reason you may want to keep this limit, is that if all your properties are in one LLC, and you get sued, they can go after the assets of all assets in that Company. I know some investors who will form a new LLC for every property. This may be a little excessive, but they are well protected. Another thought is if you have 2 $100k properties, and a $1,000,000 property, you probably want to keep the big gun in a separate company.

Edited: 06/26/2010 at 03:04AM

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Icon_minipost Sep 03 '06, 08:29 AM

I am not an expert on the subject, but my advice would be to tailor the entity to your
particular investments. An llc is easy to form. You can do it yourself, is a pas through entity like a Sub-s corp for tax purposes and is easy to run unlike a c corp. Like all entities though, strict accounting practices are essential to isolate you from the entity, very important to keep the vail intact. llc's are subject to charging orders so the veil can be breached. If you are buying property with a high potential liability exposure an llc might not do the trick? A charging order by the way is an order issued by the court allowing whomever is suing you to attach your personal assets. You might want to some research on charging orders? Each property I own is in its separate llc but none of those have been tested, knock on wood. I would contact a good real estate attorney and the emphasis is on good for some advise. You can also go to the law university libraries on line and read some case law regarding suits against llc's etc. Keep your insurance up to date and read all the fine print. I keep 2 million liability on most properties.

Hope this helps a little.

Edited: 06/26/2010 at 03:05AM

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Icon_minipost Sep 04 '06, 12:28 AM

Stugguls-
Just read your post & I am curious how you go about (with the lending part in mind)creating a new LLC for each property? I have heard that recommended before, but don't understand how to accomplish it w/o paying cash.

Also, do you create the LLC name for the contract, & then once accepted do you go file the LLC name prior to settlement?

This is confusing to me & I would like to know how this works.

Edited: 06/26/2010 at 03:05AM

Jay Owack

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Icon_minipost Sep 04 '06, 01:30 AM

I'd also like to say that the right choice (LLC or Inc) is going to depend on your situation. There's no obvious choice w/o knowing the specifics on your business and your long term goals. I recommend paying a qualified CPA or tax lawyer to talk with you -- it will be money well spent.

Edited: 06/26/2010 at 03:05AM

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Icon_minipost Sep 04 '06, 02:24 AM

Bonnie. I am assuming what he does is purchase the property in his name, then do a Quit Claim Deed to transfer the property to the company. While this does give hime liability protection, if there is a problem with the financing, it is all on him.

Edited: 06/26/2010 at 03:05AM

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Icon_minipost Sep 04 '06, 03:30 AM

Thanks Jason

Edited: 06/26/2010 at 03:05AM

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Icon_minipost Sep 04 '06, 09:24 PM

Banks don't care if your co is an llc or even a c. corp because you will sign personally for the loan responsibility otherwise they won't loan the money unless you are Boeing or? If you don't pay your mortgage, the bank will pay you a visit at your wallet. The bank will always maintain first position. You still get the other protections entities offer and often those threatening you will forgo the exercise if it is too much trouble. There has never been an entity that could not be breached. These just add another layer of protection above the insurance you must carry!

You can form as many llc's as you want to deal with and you can also quitclaim properties you already own into an entity. Make sure you use the correct language accepted by the state, on your excise tax affidavit if your particular state collects the tax at time of sale. You don't need to pay twice! An escrow or title co can help with that.

Read case law on the subject for your state. It's boring, but available on line....JB

Edited: 06/26/2010 at 03:05AM