Should we Start a LLC or Other Form of Business?

6 Replies

Greetings,

I'm wondering if we should start a LLC or some other type of business to do the following?

We are currently debt free but are wanting to take out a mortgage on the home we own, we are going to purchase Crowdstreet offerings and/or other notes, debt, etc. with the funds. In essence, we would be paying 4.125% for the mortgage and making whatever the funds pay (10-12%). 

We plan on doing this a number of times to acquire numerous paying notes and funds.

But my question is, should we run this through a business of some kind? If so, which one (LLC, corp. etc.) and what would the benefits be?

Thank you.

Mike

Ultimately it is up to you, but most people will say that you should. It costs a little money to get it going, and come tax time, it costs a little more because accountants charge per entity. The question you have to ask yourself is, how many assets do you have? If someone gets hurt, they can sue and end up taking you for all you are worth. It all comes down to your aversion to risk. By putting each house in its own LLC, you create a ceiling of losses that you can sustain in a given circumstance. It is more complicated, and expensive, but that is something each investor needs to decide on their own.

Originally posted by @Mike Cleveland :

Hi @Ted DeVitto, sorry if I didn't explain myself very well; we are going to purchase Crowdstreet offerings and/or other notes, debt, etc. with the funds. Not houses.

 Hi Mike,

I apologize for the misread. I have less experience with that then I do houses, but the concept is very much the same. By creating the LLC, you are insulating yourself personally, should you experience any legal complications. That's just my approach, but I would implore you to see what others think.

Setting up an LLC to invest in crowdstreet seems overkill if you are looking to shield yourself from liabilities that may arise at the general partner level. It's just like setting up an LLC to create a taxable stock account. You should review the indemnity clauses in the fund documents provided by Crowdstreet, and see how faults flow up to the LP level at crowdstreet, and to you as a further distanced entity. These are meant to be retail investments. Also review crowdstreet's documents when it comes to losses and capital calls. If you're looking to shield yourself from say, having to contribute additional capital in the event the deal goes belly up, you may already sign that away in your crowdstreet agreement and be tied to the deal personally.

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