LLC or property first?

Question

What came first? The chicken or the egg?

Are you a carriage before horse person?

LLC before property or property before LLC?

What are the benefits to forming the LLC while I look for my first deal? Can anyone go into details about securing credit history of an entity and credit lines without the income source? Without a property (income and losses), how difficult is the paperwork/regulatory requirements/statements without the asset? Will a perception be there that an LLC was formed for ::gulp:: decreasing tax liability dishonestly, instead of creating wealth? Any good cannoli recipes out there?

Thanks a million (the terms of this million don't mature for many years out, so really the thanks a million is thanks zero. think of it as leverage)!

Henry K.

Harvey Greenstein · Answer

From my perspective and experience it doesn't matter which comes first. Just understand the implications. LLC first means the LLC is purchasing the property. This implies a business loan if it is being financed. Business loans are at a higher rate than a personal loan.

If purchased as an individual and then transferred in to the LLC it could trigger a transfer of ownership as far as the lender is concerned, if the property is financed. I go this route and have don't think the bank cares who is paying the note. This can also effect your title insurance, so the LLC will need to purchase it's own title insurance for the property.

The true benefits that I see for the LLC is that it protects your personal assets in the event of a law suit. The other benefit is that the LLC earns, spends, and then pays taxes on what is left, where as an employee you earn, pay taxes, and spend what is left. So your operating costs, car allowance, insurance policy... are paid with pretax Dollars.

That all being said, I am not an expert, this is only my experiences. Good luck.