Real Estate Attorney vs LegalZoom.com?

Question

I think I have it narrowed down on how I want to initially structure my new business (an LLC with S-corp destination so that I don't have to pay both Personal Income Tax on profits + Business Corporate Income Tax; I would only have to pay Personal Income Tax on profits).

It's quite a bit more expensive ($1,000-$1,500) to use Real Estate Attorney to get business started vs using LegalZoom for approx $350+State Filing Fees (for their Express Gold Service).

Two questions:

1) Do you think my structure is good (LLC with S-corp designation for tax purposes)?

2) Is it best to have an attorney do the paperwork or is LegalZoom easy to work with and won't drive me insane trying to take the lower cost route?

Rob King · Answer

The majority of protection that you get from an LLC is in the operating agreement. On legaldoom you get a generic operating agreement that wont protect you to a high standard. You want an extremely detailed and professional written operating agreement that protects you in the fashion you would like. Therefore I wouldn't even talk to any Bar attorney. Yet find someone who specializes in asset protection.

Most of what your paying an the professional for is going to be this operating agreement that is very tight.

Shawn Holsapple · Answer

@Courtney McCoy - welcome to BP!

I have a similar structure [it was modeled after the Rich Dad Poor Dad education series of books].

I know starting out you want to keep your expenses as low as possible - BUT, I am a firm believer in paying the professionals to do what they do best [Real Estate Brokers, CPA's, Property Managers] and Attorneys.

I would seek out a local Attorney that not only is a RE expert but also owns property.  I did this a few years ago and it has worth every penny - IMHO.

There are several that are members of CIREIA and INREIA - mine is a member of both.

Also, it sounds like you need to read the 10x Rule - your goals are too "average"!

Massive Goals = Massive Effort = Massive Results!

- it's always good to see another Hoosier utilizing this great site!

Of course, you need to read The Ultimate Beginners Guide to REI here on BP

If you haven’t already, please read/listen to these books ASAP!

Flip2freedom episode 77http://www.flip2freedom.com/a-3-step-formula-to-a-... podcast - LISTEN TO THIS TODAY!

Rich Dad Poor Dad

Rich Dads Cash Flow Quadrant

Rich Dads Increase your financial IQ

The Real Book of Real Estate

The ABC’s of RE Investing

The ABC’s of PM

Rich Dad RE Tax Advantages

The 10X Rule

The E-Myth

The 4 Hour Work Week

BiggerPocketsPodCast -I hear #136 is exceptional!

Wholesaling101 You Tube Channel

Kent Clothier – You Tube Memphs Invest channel

Adrien C. · Answer

I'll second @Matthew Kreutzer. You're either going to pay for good legal advice now or pay for good legal advice when you realize your discounted legal advice wasn't sound. The second amount will be much higher than the first.

Courtney McCoy · Answer

@Drew Shirley

I am looking to do a few "subject to" financing deals (if I find the right people and I can help) and a few flips in 2016 (maybe 2 flips). I am still holding down a corporate job while trying to get this business started.  LegalZoom items they give are listed here: http://www.legalzoom.com/business/business-formation/llc-pricing.html (I am not sure what you get here less/more vs an attorney, but would think I'd get more customized documents with a local real estate attorney helping me.

Courtney McCoy · Answer

@Matthew Kreuzer

Thanks Matthew!

Drew Shirley · Answer

1) Indiana does not allow series LLCs (yet), so a regular LLC with pass-through taxation is your best bet.

2) Hard to answer that question unless I know what your $350 + filing fees gets you, or what kind of investing you're planning to do.

Matthew Kreitzer · Answer

I may be a little biased, as I am an attorney, but there is a reason that attorneys refer to LegalZoom affectionately as "legaldoom". It is highly recommended that you consult with a licensed attorney in your particular state to draft documents that are tailored to your particular goals. Half the reason of hiring an attorney is to review the ownership structure and confirm that this is something that is truly in your best interest. LegalZoom will probably give you the documents you need to get past the Corporation Commission of your state, but they may not protect all your financial and legal interests.

For that reason, I highly recommend using your state Bar's lawyer referral service to find a qualified attorney. Spending $1,000 on quality aid now will save you thousands when you get sued.

Real Estate Attorney vs LegalZoom.com?

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