My business partner and I are structuring our new business here in Michigan. I've listened to the podcast on limiting liability, which was awesome, but I have a couple questions.
- Is it possible to set up a series LLC in Michigan?
- Is a series LLC the best choice for Michigan?
- If possible, how?
I know that at some point I will need a lawyer, but this will help us build our business plan...
Thanks in advance for any help!
Hi @Bernie Tobin Do you have a good accountant? I just set up an LLC from mostly the advce I received from my account. He was really informative in helping me figure out what I needed and will need depending on the partners and situations. If you are interested I can give you the accountants name, he is over in the Walker area.
Thank you all for the input! We set up a normal LLC to get started.
The way I understand it. Even starting out you should have three different LLC's according to the podcast. One LLC for your buy and holds, one for any flips you are doing and one that operates as your holdings where all your business is done through. You do this for tax reasons because each one of these has different tax ratings and if you don't separate them the IRS is going to most likely tax you at the highest rating. I am working with an attorney here in Grand Rapids that specializes in Real Estate and I hope he tells me I can do a Series LLC to make things easier!
@Andy Albrecht , note that an LLC, no matter the setup, doesn't afford you any tax savings. It's all considered pass-through income (LLCs dont pay tax), and will be taxed on your personal return at your aggregate total income. In fact, it will seriously complicate your taxes, with K-1s being issued to Form 1065 of the sub-LLCs, which then in turn issue their own K-1s to each partner with the pass through income. Start mixing passive and active income, managing roles of non-participating, passive, active and managing members of each LLC, and it gets complicated fast.
Honestly I wouldn't do an SLLC, i like things being separate. I'd just have 2-3 independent LLCs that run each activity or property. Having a master LLC, imho, ties the sub-LLCs together legally, which seems to introduce more risk should would one be exposed to a lawsuit. It would also seem make them more complicated if you want to bring in partners to one activity but not another in the future. But then, I'm not an attorney or CPA.
It really depends on your anticipated risk exposure and tax situation. You could need one for each business type--or maybe not. As for buy and hold, you'll likely want one or more--depending on the number of rentals in your portfolio. Consulting a good real estate account and real estate attorney is the best course of action. You don't want to over do it--or under do it. (I wouldn't rely on advice of this sort from online sources/videos/etc.,--things are different in every state.)
@Andy Albrecht I use the Series LLC with anonymity trusts for maximum protection while hiding my clients ownership of the company and the underlying asset per the title. I went to school at Hillsdale College so I know Grand Forks well, great micro brews...but I digress...he would need to file the LLC in a state that allows SLLC filings and then register it as a foreign LLC while knowing how to keep the anonymity in place...if you need any help navigating this let me know.
Free eBook from BiggerPockets!
Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!
- Actionable advice for getting started,
- Discover the 10 Most Lucrative Real Estate Niches,
- Learn how to get started with or without money,
- Explore Real-Life Strategies for Building Wealth,
- And a LOT more.
Sign up below to download the eBook for FREE today!
We hate spam just as much as you
Join the Largest Real Estate Investing Community
Basic membership is free, forever.