Pembroke Pines, FL · Member since 2016 · 3 posts · 3 votes
Hi, I am embarking into the house flipping business in south florida. I personally am an electrician from NYC and am quite efficient in home remodeling in all almost all categories. Not that ill be doing all or most of the work, but have a good grasp on what needs to be done. My cousin is my business partner and also is the only investor. He has quite a bit of money at his disposal after a lawsuit settlement and we both decided that house flipping is accommodating to both our strengths and financial future. My question to whomever is reading is should we start and LLC or Corporation. I understand corporations are helpful in protecting the money cousin currently has. Also, if we start a corporation or LLC should we dump money into an account under the new business and then pay out to whomever necessary (contractors, agents, etc) or should my cousin pay all out of his account and than the money we get back after the flip goes into the new business account. Very new at this and any help would be much appreciated.
Vendor · Englewood, FL · Member since 2016 · 3 posts · 2 votes
10y
The question should be answered by your tax attny. The taxation is different, and you could end up paying twice. Tell your investor to write the first check to the attny, and then seed the company account to get proper write offs. As for being a NY electrician, get ready for a shocker. You need to be a Florida licensed contractor to pull permits. You can't be owner/builder unless it's your primary residence, and if you call it that, and if you plan to flip house in less than 12 months owner/builder permits become void. For investment property, you need Contractor pulled permits. Do it, but do it right.
Vendor · Englewood, FL · Member since 2016 · 3 posts · 2 votes
10y
The question should be answered by your tax attny. The taxation is different, and you could end up paying twice. Tell your investor to write the first check to the attny, and then seed the company account to get proper write offs. As for being a NY electrician, get ready for a shocker. You need to be a Florida licensed contractor to pull permits. You can't be owner/builder unless it's your primary residence, and if you call it that, and if you plan to flip house in less than 12 months owner/builder permits become void. For investment property, you need Contractor pulled permits. Do it, but do it right.
Attorney · Toledo, OH · Member since 2015 · 84 posts · 58 votes
10y
Ken's comments are spot on. Make sure you speak to an attorney prior to purchasing any property.
Have the attorney review the way you plan to operate your organization to make sure you get the best fit for your business plan. Generally speaking though, you want to avoid using a corporation if you're going to have an appreciable asset such as real estate. Here, considering your cousin's assets, you definitely want to make sure you use an LLC to protect his personal assets. If you are licensed in Florida and plan on having an operational side of the business, you may consider having a separate LLC with an S-Corp election once you reach around $50K on that side of the business.
As far as bank accounts, the important aspect is that you do not commingle funds. You'll want an EIN and you'll want your attorney to explain how to keep the funds separate to reduce the likelihood of anyone "piercing the veil" of the LLC (meaning they would be able to sue you two individually). Getting sloppy there is the quickest way for someone to try to get around the LLC to go after your cousin's personal money.
Investor · Boca Raton, FL · Member since 2015 · 58 posts · 20 votes
10y
If you are buying alone, buying your name and transfer into an LLC, which you can create at sunbiz.org. If you are investing with an investor use an Attorney who is instrumental in writing the operation agreement.