Do I need a DBA or LLC?

Question

Looking to buy my first 4-plex. Do I really need a DBA, or since it's residential property can I just keep good records and have everything in my own name?

What if I buy the property in my name, and then get a DBA to run the property money through, is that okay since the property would be held in my name instead of the DBA?

thanks in advance

Jeff B. · Answer

Are you aware that a Partnership is one of the worst entities for RE?

Forming a partnership makes each partner equally liable for all the other partners - - check this with your personal attorney for ALL the details.

There are two reasons for legal entities of any form:

• to define the relationships between the parties and the economics of the entity
• to isolate ones personal life from the professional activities, including liability of the entity from reaching back into your personal life/assets.

Mark Yuschak · Answer

I have the same setup, Joe.  Most of my properties are held in my personal name with no DBA.  I also have $2 million dollars of liability protection.

Knowing that is not the norm and I can get better tax breaks, I have started an Inc. and all recent purchases are there including my rehab projects.

K W · Answer

Thanks for everyone's advice. The properties i was looking at didn't work out - - thanks mostly to this forum and the help they gave me on number-crunching - - you all saved me from making a bad purchase.

I'm still looking though....

Sharon Bartmasser · Answer

I have all my properties in LLC's.  I don't do this because of the bookkeeping, although it turned out to be easier to do the books in a LLC, but because of hopefully the legal protection it gives me.  Might want to talk with an attorney or Accountant.  The actual process of starting a LLC is pretty easy.

Josh Green · Answer

if u are getting a dba then i take it you are going to be just doing a sole prop dba? if thats the case, its not gonna make a difference. u can use your personal ssn.
            
            for liability purposes, i say close in your name and then deed it to an LLC. it will also be easier for you during tax time.

Christopher Lafever · Answer

So im startjng a partbership with a fellow investor. So i get a dba up front before our first house flip or wait and get an llc.

Greg Boots · Answer

Joe,

The LLC insulates you from the activities associated with property.  This is known as inside liability protection.  The harm that occurs on the property will not bleed out to the members of the LLC.

An umbrella policy is good to have but it is not a subsitute for an LLC or any other business entity.

Will Barnard · Answer

Joe,

I am sure you already read it, but the answer to your question in this thread was made in this thread (for those who would like to read it)
http://www.biggerpockets.com/forums/48/topics/31818-llc-s-vs-umbrella-policy

Also, as Greg stated, the LLC is an "inside liability protection" meaning that you personally are protected from the entity, but the entity is not protected from you.
In other words, if you were to drive drunk and kill someone, they (their family) could sue both you and all your holdings, including your assets held inside your entities, but if your tenant falls and sues, they can only sue the entity (unless you were found to be negligent)

Joe Salimao · Answer

The thing I don't think anybody can really answer is what protection the LLC gives you over an umbrella policy which you probably should have anyway.
Any attorneys out there that can answer this? I know there is a supposed extra layer of protection but if I have a 2 million dollar insurance policy is that good enough?

Greg Boots · Answer

Kathy,

I agree with what has been said. Even though you file a DBA the property is still held personally.  If there is any type of liability exposure on the property you will open yourself to be sued personally.  
Place the property in an LLC.  The LLC will help contain the liability exposure inside of the LLC.  Since the LLC will have it's on unique name filed with the Secretary of State it won't be necessary to file a DBA for the business.

Do I need a DBA or LLC?

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