Start business before or after acquiring properties?

8 Replies

Should I start and fund a business (LLC) before acquiring my first property?

Yes, protection starting off from the beginning

I've had a rental property for 2 years. I haven't created an LLC yet, but I also don't have a lot of personal assets to protect. I'm working now with @Richard McGouirk  to buy a 4 plex. Once I get a few properties, or create some actual wealth or personal assets, then I will be more focused on asset protection. Right now, I'm just trying to make things happen.

Thanks for your answers.  As this would be a partnership with my girlfriend, should I have an attorney assist us?

@Timothy Hood

If you will be forming a partnership, or even if you choose not to form an entity and simply joint venture into transactions, you would really want to have an attorney help you out.  If something happens to either of you, or if the relationship sours, a written agreement will protect everyone's interest.

Purchasing properties in a LLC generally only works if you are paying cash or using private money. Most banks will not lend to LLC's.

Find a good real estate attorney, perhaps by networking in your local real estate investment club, and seek their advice.

My brother, @Richard McGouirk , and I are going to write up a partnership agreement and have an attorney look at it. I'm not going to partner with anyone without having the details in writing, not even family. 

@Timothy Hood Great question and post. You can file for an LLC by yourself for about $100 most places and you can't do it incorrectly. If is incorrect, the governing entity just kicks it back. I would complete this if you have renters or partners involved.

If you are buying and selling land, I would get a few deals under your belt and then file.  

It depends on how you are going to finance it- if you have cash then go with an LLC if you are getting a mortgage then no LLC until after you purchased it.

Definitely set up an entity to hold your assets, but your best bet will be to avoid litigation unless at least $100,000 is at risk.  Anything under that and you risk paying more in attorney fees and possible damages than you can get from litigating.  If you have to go to court, you've already lost.  Try to find solutions without getting lawyers involved.  In most cases it is going to be less expensive.

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