LLC now or later?

30 Replies

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considering less than 10% of people that try to wholesale actually stick with it and become successful, id get a deal done before you get too excited about being a "real" company.  

Hey @Aquila Phillips.  Unless your first deal is pretty huge and long term I would not worry about setting up an entity just yet.

Go out there and get a deal under your belt to prove to yourself that you are committed and are going to be in this business long term then worry about the LLC.

In the end tons of things can be done ahead of time before getting deals done.  And unfortunately this business is littered with people doing a bunch of things other then making money......

hope that helps....PM me if you need more help....

Peter

Originally posted by @Bac Nguyen:

Also, you need to have an entity (LLC, S-Corps) for tax write off. ...

Wow, some misinformation in that paragraph that hasn't been pointed out by the numerous intervening posts - so be careful when taking advice from Internet posts ;)  Where are the accountant and CPA BP members when such non-sense gets posted?

You do not "need" any sort of entity for tax write off purposes. If you are a buy and hold investor, you will still get to deduct your rental property expenses. If you are flipping, you still get to count the expenses toward cost of goods. 

That does not mean that there aren't some additional tax advantages available to those who use an entity as part of their investing strategy. It was simply pointing out that an entity is not a "need" when it comes to taking a tax write off. 

Originally posted by @Austin Mudd:

I have a question, I'll be moving to PA soon and will be back to another state (hopefully CA) after about two years. I think it's a worthwhile question for those who also might be in situations where they need to move around. Is there a lot of trouble in transferring LLCs/other business entities state-to-state? 

Nobody gave you an answer - I'll try but by no means am I an expert on this. 

In PA (and I believe this holds true for most states as well), you can conduct business in the state by first registering your "foreign entity" with the PA secretary of state or the department of state; but that would mean that you have to continue to maintain the "foreign entity" in the state where it had been created - your CA LLC would continue to have to pay the $800 or so a year that CA gets for that. PA does not have that annual charge (but it has some other "corporate" taxes to be filed). So there might be some good reason to stop operating the "foreign entity" - a true expert should be consulted based on your individual circumstances.

Beat me to it, Steve Babiak (not that I'm a CPA). Any individual can file a Schedule C or Schedule E for business or rental tax benefits without forming an LLC.

Also, electing to file taxes as an S-Corp does nothing to protect assets. It can, however, shelter some income in the form of dividends, as stated above.

Legal/Entity/Protection Vehicles:
Corporation
Limited Liability Company

Tax Reporting Methods:
C-Corp
S-Corp
Partnership
Sole Proprietor

Originally posted by @Steve Babiak:
Originally posted by @Austin Mudd:

I have a question, I'll be moving to PA soon and will be back to another state (hopefully CA) after about two years. I think it's a worthwhile question for those who also might be in situations where they need to move around. Is there a lot of trouble in transferring LLCs/other business entities state-to-state? 

Nobody gave you an answer - I'll try but by no means am I an expert on this. 

In PA (and I believe this holds true for most states as well), you can conduct business in the state by first registering your "foreign entity" with the PA secretary of state or the department of state; but that would mean that you have to continue to maintain the "foreign entity" in the state where it had been created - your CA LLC would continue to have to pay the $800 or so a year that CA gets for that. PA does not have that annual charge (but it has some other "corporate" taxes to be filed). So there might be some good reason to stop operating the "foreign entity" - a true expert should be consulted based on your individual circumstances.

Thanks for the response. I haven't created a LLC yet, but it's much cheaper than CA in PA I believe. I realized I could also operate under a DBA for now too.

@Austin Mudd,

One thing you need to understand about a dba name: it's still you. It offers NO protection against liability or litigation. You and your personal possessions are still exposed and at risk.

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