LLC Set-up: Lawyer or Do It Yourself Online

Goals, Business Plans & Entities

LLC Set-up: Lawyer or Do It Yourself Online

Rental Property Investor · Carlisle, PA · Member since 2013 · 1k+ posts · 543 votes

Hi everyone. I am getting ready to close on property number 6. As an intro, my five other properties are all SFH. This one is a four family. Up to this point I have not had an LLC, I have just carried are large umbrella insurance policy. I think it is the time that I set up the LLC for this property and start moving in a direction that will separate and protect my assets individually, to the maximum extent possible.

I am looking for recommendations as to whether to use an attorney to set up the LLC or set one up myself online. Someone suggested corporation.com as one option for a website that I can set it up myself. If the answer is do it myself online, I would love to hear of other online companies that provide the service to do so.

I will be posting the story of my multi-family in success stories after the closing in a couple of weeks!! Thank you all in advance for your suggestions and feedback.

143 views

Most Popular Reply

Rental Property Investor · Rockford, IL · Member since 2014 · 4k+ posts · 2k+ votes

10y

My group's tax and legal expert is a partner in a good size law firm. They have a department in their office with a sign on the wall: "We Fix (Do-It-Yourself) Entities" (LLCs, S-Corps, etc.)

You say you're not currently using an entity structure and have an umbrella policy. Translation: "I'm standing here naked carrying a REALLY thick towel and hoping for the best."

A business entity alone is not enough to protect you well. You need a multi-layer strategy such that even if a veil is pierced at one level there is another layer of protection behind it.

Asset protection is NOT the place to cut corners - you WILL lose, BIG time! Every dollar you avoid investing puts your entire business at risk. Every dollar you invest in asset protection reaps many times its value in protection, security and peace of mind.

I can connect you with my group's tax and legal expert, if you want. Connect with me and we can talk.

David J Dachtera

"Success is not a destination. Failure is not an event. Success is a process, failure is a choice."
- DJ Benedict

See this reply in the discussion

35 Replies

Jump to latestLatest

Sort by

Michael H.
Investor · Kansas City, MO · Member since 2016 · 130 posts · 64 votes
10y
Online through the state is super easy and way cheaper
0 Reply
Micah Harris
Investor · Lexington, KY · Member since 2015 · 7 posts · 2 votes
10y
I actually had my CPA do it. Cost $275 as opposed to $900 from my lawyer
0 Reply
Edward B.
Investor · Midlothian, VA · Member since 2015 · 980 posts · 823 votes
10y
I vote for the attorney. It is super easy and cheap to set up an LLC, but not one that will actually accomplish what you want it too. Especially if you are serious about asset protection. I imagine plaintiff's attorneys get giddy when they see some boiler plate operating agreement without the specific language that is actually going to protect you.
0 Reply
Austin Watson
Charleston, SC · Member since 2014 · 12 posts · 3 votes
10y
Have the closing attorney do it. They will likely do it for next to nothing. Especially if you have used the same attorney in the past. That has been my experience anyway.
0 Reply
David Dachtera
Rental Property Investor · Rockford, IL · Member since 2014 · 4k+ posts · 2k+ votes
10y
@Kevin Hunter,
My group's tax and legal expert is a partner in a good size law firm. They have a department in their office with a sign on the wall: "We Fix (Do-It-Yourself) Entities" (LLCs, S-Corps, etc.)
You say you're not currently using an entity structure and have an umbrella policy. Translation: "I'm standing here naked carrying a REALLY thick towel and hoping for the best."
A business entity alone is not enough to protect you well. You need a multi-layer strategy such that even if a veil is pierced at one level there is another layer of protection behind it.
Asset protection is NOT the place to cut corners - you WILL lose, BIG time! Every dollar you avoid investing puts your entire business at risk. Every dollar you invest in asset protection reaps many times its value in protection, security and peace of mind.
I can connect you with my group's tax and legal expert, if you want. Connect with me and we can talk.
David J Dachtera
"Success is not a destination. Failure is not an event. Success is a process, failure is a choice."
- DJ Benedict
5 Reply
Kevin Hunter
OP
Rental Property Investor · Carlisle, PA · Member since 2013 · 1k+ posts · 543 votes
10y
@Michael Hon, @ Edward B., @Austin Watson, @ Micah Harris: Thank you all for your input, I greatly appreciate it. @Austin Watson, one of my concerns with that is it is in my original home state, CT, but I don't live there any more. They are notoriously brutal in regard to taxes. I live in VA right now but am using a property manager back there. @Edward B., that is exactly what I am worried about. An LLC that looks great on paper until I need it to come through, and then realize it is not effective. @Micah Harris, did you set yours up in Kentucky or a different state. I have read quite a few articles about Nevada and Delaware being the preferred states..... Thoughts?
0 Reply
Kevin Hunter
OP
Rental Property Investor · Carlisle, PA · Member since 2013 · 1k+ posts · 543 votes
10y
@David Dachtera, thanks for the comments. Just messaged you.
0 Reply
Dirk Jackson
Investor · Lima, OH · Member since 2016 · 32 posts · 7 votes
10y
I just set up LLC thru Secretary of State for 99.00. Congrats on property number 6.
0 Reply
Kevin Hunter
OP
Rental Property Investor · Carlisle, PA · Member since 2013 · 1k+ posts · 543 votes
10y
thanks @Dirk Jackson. Congrats on your LLC.
0 Reply
Dirk Jackson
Investor · Lima, OH · Member since 2016 · 32 posts · 7 votes
10y
No problem. I too have 5 SFH lol. I have been looking into multifamily units but think I will stick with the bread and butter for a bit.
0 Reply
Bill SchrimpfBusiness Member
Real Estate Agent · Reno, NV · Member since 2014 · 353 posts · 189 votes
10y
Spending a grand or so now on a good attorney will probably more than pay for itself down the road when you get sued or a unit burns down. Murphys Law is not a theory. Simply moving properties into the LLC properly is a legal action in most states too that is best done by an experienced pro.
[email protected]775-741-2326
ERA Realty Central - Bill Schrimpf58 Reviews
Website View Page
0 Reply
Jon Miller
Investor · Chesapeake, VA · Member since 2016 · 17 posts · 8 votes
10y
Kevin,
Originally I set up an LLC myself in Virginia (the state corporation comission has directions on how to do it, I think the website is SCC.gov, cost about $100 to start, $50/yr, and $75 to cancel). I was never fully sure I did it properly or that it would protect me in court, so I went through my lawyer and he set it up ($100 for the SCC, $400 for him). I'm not sure if my lawyer set it up any better than I did, but for less than $1k (tax deductible too) I'm happier with the lawyer doing it. You have the added complexity of doing business across state lines, so I'd say go with the lawyer.
0 Reply
Kevin Hunter
OP
Rental Property Investor · Carlisle, PA · Member since 2013 · 1k+ posts · 543 votes
10y
Bill S. , Jon Miller , thanks for both your inputs. I think you are both right. Either way it is not a lot of money in the long run...... Peace of mind can be worth something as well!!
0 Reply
Ayodeji Kuponiyi
Investor · King of Prussia, PA · Member since 2014 · 1k+ posts · 339 votes
10y
Great post! I was wondering the same thing but then it became clear to me that if creating an LLC is easy and anyone can do it, how secure are my assets? I didn't want to cut corners in regards to asset protection.
This is a business. Remember that. Because we're operating a business, its smart and cost effective to hire people who are smarter than us. With that said, why do something yourself because its cheaper when you can hire a "professional" who specializes in that field. The up front cost, whether affordable or pricey, is nothing compared to the what if costs in the future.
Best of luck and let us know what you decide to do.
1 Reply
Edward B.
Investor · Midlothian, VA · Member since 2015 · 980 posts · 823 votes
10y
@Kevin Hunter, typically it is better to set the LLC up in the state that the property is located. Reason being that it will have to be registered there anyway. So if you set up a Nevada or Delaware LLC you will have to register it in CT as a foreign entity and will be paying annual maintenance fees in both states. Also, if you get sued it will likely be in CT and those laws will most likely prevail, regardless of where your LLC is based. It is not quite that simple so you definitely need to talk to an attorney and probably a CT attorney. States are very specific in terms of business entities and the protections they afford. In terms of AP I would argue that VA is just as good as NV and a lot less expensive too. In terms of privacy NV and WY are the places of choice these days. Those are much more sophisticated strategies, though. Which means much more complicated and expensive.
@Jon Miller, how long is your operating agreement? The ones I had set up back in the day by general attorneys were about six pages. The ones I recently had set up by an asset protection/RE specialist is 61. I'm not saying that longer is better, but there is definitely specific language that you want in the operating agreement to ensure your protection. For example, how your operating agreement states that you handle distributions can completely undermine your charging order protection if not worded correctly.
1 Reply
Michael Seeker
Investor · Louisville, KY · Member since 2011 · 1k+ posts · 1k+ votes
10y
Originally posted by @David Dachtera:

@Kevin Hunter,
Asset protection is NOT the place to cut corners - you WILL lose, BIG time!
I've heard this over and over but still have yet to hear a specific example...do you have one?
0 Reply
Dirk Jackson
Investor · Lima, OH · Member since 2016 · 32 posts · 7 votes
10y
I just setup the LLC up for tax purposes. I have yet to roll any of the rentals into an LLC. I don't use an umbrella just individual policies and renters policies for the tenants. I have to research the benefits of rolling them over to the LLC.
0 Reply
Tiffany Morris
Newark, DE · Member since 2016 · 3 posts · 0 votes
10y
My partner and I got quoted $500 + filling fees to setup an LLC(s) in Delaware. This price includes legal advice regarding the structure of our LLC(s), a detailed walk through of the filling paperwork, and a basic operating agreement. My partner is a penny pincher and thinks the price is a little high. We will be interviewing another lawyer to obtain a second quote so we can make our final decision.
We know the filing fee is around $150 and can be easily done online, yet we do not want to run the risk of filing without understanding the legal impacts for each line item on the paperwork. If this is your first LLC and you are looking at the form(s) and you have questions, get a lawyers advice before you submit the paperwork. It could save you some unforeseen troubles. Lastly, get price quotes from a few well reviewed lawyers that have a library of services that could be useful to your business down the line.
@Edward B. I agree with your point regarding the operating agreement.
0 Reply
James WilcoxBusiness Member
Real Estate Agent · Bowling Green KY ~ Lexington, KY · Member since 2015 · 1k+ posts · 602 votes
10y
@Kevin Hunter I suggest you just keeping what you are doing without the LLC but that is just my 2 cents lol. =P
REI James w/ eXp Realty54 Reviews
Website View Page
0 Reply
David Dachtera
Rental Property Investor · Rockford, IL · Member since 2014 · 4k+ posts · 2k+ votes
10y
Originally posted by @Michael Seeker:

Originally posted by @David Dachtera:
@Kevin Hunter,
Asset protection is NOT the place to cut corners - you WILL lose, BIG time!
I've heard this over and over but still have yet to hear a specific example...do you have one?
If you need one, you should playing the high-stakes tables in Vegas with the other whales.
How many tornadoes does it take to wipe out a town?
How many floods to discover you don't have the right flood insurance?
How many lawsuits to make you homeless and destitute?
Remember: people don't sue you because you messed up, they sue you because they see you have something of value (properties in your own name) and they think they can convince the court to take it away from you and give it to them - that's how THEY make THEIR living and grow THEIR "wealth"!
David J Dachtera
"Success is not a destination. Failure is not an event. Success is a process, failure is a choice."
- DJ Benedict
2 Reply
Michael Seeker
Investor · Louisville, KY · Member since 2011 · 1k+ posts · 1k+ votes
10y
Originally posted by @David Dachtera:

Originally posted by @Michael Seeker:
Originally posted by @David Dachtera:

@Kevin Hunter,
Asset protection is NOT the place to cut corners - you WILL lose, BIG time!
I've heard this over and over but still have yet to hear a specific example...do you have one?
If you need one, you should playing the high-stakes tables in Vegas with the other whales.
How many tornadoes does it take to wipe out a town?
How many floods to discover you don't have the right flood insurance?
How many lawsuits to make you homeless and destitute?
Remember: people don't sue you because you messed up, they sue you because they see you have something of value (properties in your own name) and they think they can convince the court to take it away from you and give it to them - that's how THEY make THEIR living and grow THEIR "wealth"!
David J Dachtera
"Success is not a destination. Failure is not an event. Success is a process, failure is a choice."
- DJ Benedict
I'm not arguing with your premise, you just make it sound like it is a certainty that if you don't pay a lawyer a lot of money then you will get sued and lose everything you have. I've never heard of a scenario where that has happened and was hoping you might know of one that you could share.
Your argument does not illustrate why there might be an advantage to paying a high priced lawyer to set up a complex entity structure instead of just paying for a significant amount of liability insurance.
I could get in a costly car accident anytime I leave the house. I have insurance for that...I don't pay somebody to put the vehicle title into a complex entity structure so that I can't be sued if an accident does happen. Just trying to understand why you are so adamant that an expensive attorney is an absolute necessity.
Any real life examples would be great!
0 Reply
Account Closed
Rental Property Investor · Vancouver, WA · Member since 2014 · 308 posts · 144 votes
10y
I used Legal Zoom and never had an issue. Fairly inexpensive as well.
0 Reply
Trent Kruessel
Real Estate Professional · Salisbury, MO · Member since 2016 · 51 posts · 7 votes
10y
So essentially, has anyone ever formed an LLC by going through a website and DIY-ing it and then gotten burned/sued when something bad happened and the DIY LLC failed to protect you and your assets?
Is that close to what you are asking @Michael Seeker? I would like to hear some success/learning stories on this too.
0 Reply
Michael Seeker
Investor · Louisville, KY · Member since 2011 · 1k+ posts · 1k+ votes
10y
Originally posted by @Trent Kruessel:
So essentially, has anyone ever formed an LLC by going through a website and DIY-ing it and then gotten burned/sued when something bad happened and the DIY LLC failed to protect you and your assets?
Is that close to what you are asking @Michael Seeker? I would like to hear some success/learning stories on this too.
More or less. I've searched extensively for something to this effect and come up empty. I'm not saying that hiring a professional is a bad idea by any means, but just like EVERYTHING related to REI, doing it yourself is not a bad idea if you take the time to learn and make sure you do it properly.
That being said, I've seen all kinds of DIY jobs that turned out horribly (including plenty of my own). The key is to study, learn and acquire the proper knowledge and tools to complete the job correctly. I'd say most poor DIY jobs are due to a lack of knowledge or proper tools needed to do the job. The question is, do you want to acquire the knowledge and tools or hire somebody else who hopefully already has both?
0 Reply
Matthew Kreitzer
Attorney · Winchester, VA · Member since 2015 · 726 posts · 387 votes
10y
Originally posted by @Michael Seeker:
More or less. I've searched extensively for something to this effect and come up empty. I'm not saying that hiring a professional is a bad idea by any means, but just like EVERYTHING related to REI, doing it yourself is not a bad idea if you take the time to learn and make sure you do it properly.
That being said, I've seen all kinds of DIY jobs that turned out horribly (including plenty of my own). The key is to study, learn and acquire the proper knowledge and tools to complete the job correctly. I'd say most poor DIY jobs are due to a lack of knowledge or proper tools needed to do the job. The question is, do you want to acquire the knowledge and tools or hire somebody else who hopefully already has both?
You're welcome to shadow me for a day if you feel like seeing what kinds of misfortune can befall a business that doesn't utilize an attorney for their business preparation. You want an example?
One of my major clients incorporated without the help of a lawyer and relied on association documents to get their business going. By the nature of their business and the locality in which I operate, they have a lot of deadbeat clients. So, we often end up in collections. Here is the problem; the association agreement they relied on (which was not prepared by a lawyer) lacked a merger's clause! What is a merger's clause? It is something that says "This document speaks for itself, no oral assurances". Seems basic right? Every contract should have something like that. However, Virginia requires specific invocation language.
And so, as you might expect, deadbeat client lied on the stand according to my client about oral assurances that my client violated. Guess what? Judge believed them! Ordered damages to opposing party. So I appealed and whipped the floor in Circuit Court, but that isn't the point.
Have legal documents prepared by an attorney, or you WILL most likely have a crappy time about it.
0 Reply

Join the conversationCreate a free account to reply, vote on answers and follow this thread.

Log In Join for Free