Business Name, LLC, Personal Name?

Question

Jonathan Klemm · Answer

@Nathan Arnold - I hem hawed around this stupid question for too long.  It's not worth your time yet.  Just get the deal and then stuff will fall into place.  You are taxed the same way whether you have a business name or not so unless you don't want someone to know you own the building there is no reason to do it.  Plus, if you open an account with a business name and then open an LLC down the road you will have to open new bank accounts anyway.  My recommendation is keep it in your name and take advantage of the lower interest rates until you have a portfolio worth holding in an LLC.

John Woodrich · Answer

To piggyback on what @Tom Gimer said, he is correct that an assumed name or DBA is not a legal entity.  It is just a name you own.  An assumed name does not afford any legal protection therefor even if you could title it under your assumed name, they ONLY benefit would be that your personal name isn't on the title.

If you don't want your personal name on the title you may as well setup an LLC as it will solve that and afford you some liability protection.

Clint Galliano · Answer

@Michael Dahlheim Your title company's reasoning sounds odd. It would seem to me that if your company owns the property and your company holds the insurance, then claims are not an issue, just a matter of business. And selling should not be an issue either. You would just need to make sure that the title is held in the company's name.

When we bought our last property as a cash sale, the real estate attorney at the title company encouraged us to title the property in a company's name. This was in Louisiana. Maybe it is different in Minnesota.

John Woodrich · Answer

A corporation can be a way to save money however the primary reason people setup legal entities is for legal protection.  For flipping, wholesaling, property management income, and realtor sales a corporation can be beneficial however it is generally not a good idea for rentals.  The corporation does not provide "more deductions" outside of the administrative fees to maintain one.

If it is an all cash purchase you can title it however you want.  If you already have a contract the work will require more work for the realtor to create addendum and the title company may need to get more information from you.  If you want it in your company name do it.  Don't let the tail wag the dog and have them make you do what is most convenient for them...  They are there to help you.

I can explain the entity part more in depth but the conversation is too long to write out on here.  if interested send me a message and we can connect.

John Woodrich · Answer

Your ability to purchase a property in your company name will largely depend on the they loan package you are working on.  I am closing on a 4 plex this month and because I am using a conventional loan with 25% down the lender is requiring that it be put in my personal name.

You can file for a business name (DBA - doing business as) if you would like to transact business under a name other than your personal name.  I would recommend separate bank accounts for the sole purpose of tracking expenses.  If it is in your personal account you will have to sort personal and business each month and if you get behind it can be difficult.  If you have a separate business account for all business purchases that will help separate your expenses when it comes to tax time.

Richard Elvin · Answer

I got a tax license from my county, all that is required in TN, and opened a business checking/savings account. I find it simpler to have business and personal money separate. Plus, in TN, it is required that deposit money be kept separate. (not sure if that's national or not) If you mix deposit money with any other monies you forfeit any claim to it, even if the tenant damages your property; at least to my understanding. ymmv

Tom Gimer · Answer

@Michael Dahlheim An assumed name (DBA) cannot own property in any of the jurisdictions we cover. Assumed names are the property of an individual or entity owner. They own nothing.

The legal name of the owner goes on title... and it is this name which is indexed and judgment reports and other research are all conducted on the legal name of the owner.

Imagine what a mess the system would be without this requirement.

Michael Dahlheim · Answer

Thank you @Clint Galliano.  I'm guessing these people may not have done this very often, or at all, and just do not know how it would work.  I don't see why it wouldn't work just fine, but I'm letting it slide this time.  Thank you for your input!!

Michael Dahlheim · Answer

I'll send you a message and would like to connect with you...even in person since we live right next door if you are still in North Branch (I'm in Cambridge).  The title company lady said that they wanted my personal name because it becomes a problem putting my "assumed name" (company name) when I want to file a claim for insurance or go to sell the property.  I asked what the problems would be, but they could not answer it.  For the time being I just said to put it in my name until I can really learn more about the legal side of things.

Michael Dahlheim · Answer

The funny thing is I was reading the infamous Rich Dad Poor Dad last night and, as much of the book does say, a corporation is the best way to save all sorts of money via tax deductions.  I'll look into this later, but I just thought it was interesting that I was having this issue and the book "told me".  Does anyone have insight on using a corporation?  Of course I know the answer will be to speak with my tax professional, but I'm asking the business owners as well (BiggerPockets people).

As to John Woodrich, I have the home under contract for $10,000 and am not using a bank for any of the money.  I will look to refinance through a bank if the BRRRR calculator plays out correctly.  I actually may have a renter for the house already as well, so getting some of the repairs done fast will be necessary.

Business Name, LLC, Personal Name?

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