Hi everyone. I'm starting up a real estate investment business. I've heard the maximum m asset protection comes from setting up an LLC in Nevada. Nevada Corp Headquarters (than Merril's company) has contacted me to set it up for $1200. Does this sound reasonBle? Any advice? I'm very new so any direction would be greatly appreciated! Thanks.
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Don't believe all the hype, @Kirsten Mastro . You won't necessarily be more protected having your LLC in NV. Also, you'll have to pay "foreign entity" fees/taxes doing that. Just open up in the state you're doing business.
To open your LLC, as already mentioned, $1200 is a lot and ridiculous. Someone is taking advantage of you. You can do this yourself on LegalZoom or something. Once you're formed, then go open up a checking and savings account with a bank.
Oh, and BEFORE you form your LLC, you should have already set up your mailing address! Unless you don't care that your personal home address is on file for the world to see, you need another address. And a PO Box won't work because it's not accepted as an official address. You'll have to pay a little more and get a UPS box or something.
Protecting your assets starts with you simply not violating laws and/or codes. Have insurance (like landlord/business insurance); this would cover you if you were to end up in court over someone suing you. But really--just know your laws and do things right and you'll be fine. You'll meet a few jerks who might try to threaten you with court over silliness, but find that they're just all talk. We're all here to help you, and help you save money!
It is not necessary to pay $1,200 to set up an LLC. Try New Mexico. You can set up an LLC for $50 yourself. New Mexico has no annual filing fee required however the use of a registered agent in New Mexico is required. You can save yourself a substantial amount of money now and ongoing.
Nevada, Delaware & Texas offer the best asset & liability protection. Nevada & Texas have the lowest tax liability against entities registered in their states. However, unless you have significant assets that need protection, having an out of state LLC is probably overkill. And, if you build your assets to a point where you do need additional protection, you can always form an out of state holding company and transfer the assets to that entity for protection. There is no reason to get crazy.
I'm not going to bash Than Merrill, but I will say that I attended his 3 day Fortune Builder's session and signed up for Mastery. I also quickly demanded a full refund, once I saw that everything was an upsell to the next thing.
Texas offers outstanding protection and low tax rates, and I can form my own LLC (a Series LLC at that) for $350. Done.
I agree with @Kristen about Nevada, Delaware & Texas offer the best asset & liability protection. I spent less than $400 for LLC that's including "Registered Agent".
$1,200 for LLC way toooo much, so many promotion to get the money out from your wallets, be wise.
Go to legalzoom.com and get the quote for LLC on your state
Anyway Nevada is the best if you want to build C Corp.
A bunch of guru garbage designed to separate you from your cash. If you have assets and are concerned about protecting them use that money to discuss asset protection and come up with a strategy with an attorney. Get your attorney to help you create solid operating agreements. Do the filings yourself directly with the state. Create the LLC in the state where you're doing business.
thank you everyone! This is really great perspective. I appreciate your help. Ok- back to doing my homework to weigh the risk of having only a FL LLC. Thanks again!
Hi @Kirsten Mastro - I am a real big proponent of using layers of insurance for protection although I have always held my properties in an entity as well. I disagree with a lot of what is said above, because it is all made to sound so easy. It is not. You get exactly what you pay for. Unfortunately, maintaining the corporate veil of an entity is much, much more time consuming and difficult than simply setting one up for $50. Local attorneys - any attorney for that matter can set up an entity for you - but, that does not mean they are going to properly set it up or file it correctly or give you any advice or future assistance in maintaining your entity. There is A LOT more involved with properly maintaining an entity. I recently used NCH (they are not owned by Than Merrill, just recommended by him and been in business for over 20 years - long before he started flipping houses) to restructure my corporate entities and while I found them to be much more expensive than other routes I could take and certainly more than the ones I set up through my local attorney, they are now set up correctly and set up to be maintained on an annual basis correctly.
You may not be comfortable paying that amount of money and that is ok. I was comfortable with the price, but only because I know personally the stories of corporations not holding up under judicial scrutiny. The high level of service and touch that they offer and the auto updating for me on my entities was the selling value that helped me make my decision.
If you choose to go one of the other routes just make sure you are clear on what you need to do annually and the records you need to maintain to stay in compliance so your entity remains valid. As I said at the beginning, I would also use layered insurance as you acquire assets even if you are only flipping properties and holding short term ----- have insurance!
That combined with a properly maintained entity provide you very good security for all of your assets including your bank accounts, your investment accounts, your personal house and your vehicles - not just your business. If the corporate veil is pierced, then your personal assets could be (please don't read that as fear - I'm not saying that they will be - only that they could be) in jeopardy, so if you have anything to lose, just make sure you properly maintain your entity no matter where you file it or how you do it.
@Kirsten Mastro $1200 to create an LLC is absurd. Filing fees in Wyoming are $100 and they don't tax you for property that is not located in WY. However you really need to locate the company in the state you will be doing business in. If you plan to have many millions invested you need to go to a professional who will help you set it up and structure it for ease of raising money and tax savings. Either way you need to get educated on how to operate an LLC as it should be operated. They are not much good if you do not follow corporate formalities.
I set up my S-Corp using Legal Zoom. It was about $700-$800.
You didn't indicate what type of real estate business you were going to do, but if you're talking about rentals and associated liability issues, you might consider in addition to your regular rental policy insurance, an umbrella policy. It's quite inexpensive and can provide significant additional coverage. The topic of insurance and LLCs has been discussed before on BP. Do a search in the upper right to find more. Good luck.
I recently finished a great book on this subject. Granted it's the only book I've read on the topic, but it answered several of my questions. It's called The real estate investor's guide to corporations, LLCs, and asset protection entities by Richard T. Williamson. It's fairly recent (2008) and covers partnerships, corporations, and various forms of LLCs, and a little bit on trusts. Williamson is an attorney in California, so there's some additional knowledge for investors in his home state. He also says he invests in real estate himself.
He approaches partnership/LLC formation from the standpoint of asset protection, which is the most important reason to setup such a entity. He also warns against paying others to set up your LLC, suggesting that the key to maintaining limited liability if you're sued resolves around a properly formed LLC. He recommends undertaking the process yourself, while consulting an attorney and CPA. While this hands on approach is more involved, you can ensure your new asset protection entity has been created correctly, and it's likely cheaper (including the costs of professional advice).
He also mentions Nevada LLCs as a sales product of the unscrupulous.
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Last post was 2 years ago on this topic but I have a similar question and didn't want to open a new topic. I got a little confused. I attended to Fortune Builders 3 day event e few weeks ago. They really talked a lot about opening llc in Nevada. Then as a person who is getting prepared to get in to investing I would like to know which state is better to open llc in. I am planning to do major part of my business in Texas but I may go somewhere else in a couple of years. Based on my research Texas is one of the best states to have an llc in. However Nevada, Wyoming and Delaware also mentioned by people.
Can you guys please help me understand which state and why?
I would suggest talking to an attorney that specializes in asset protection. They will usually clear up these sorts of questions in no time, Much easier than trying to distill a million forum threads. I recently did this after trying to sort things out for months, and in 5 minutes in a free consultation, I had a plan and an understanding of my exposure and what my state laws are. Now I just have to decide whether or not to pony up.
No you don't need it. Get a Texas LLC. if you're just starting out, this is a waste of lot of money and bad information. I have gone down these paths and you can have great asset protection without Nevada. Most of these "guru" actually tell you to get a Nevada c-corp. Then you get killed on taxes. You can even hire nominees in Nevada and hire them to use their social security number to erase your name from the record.
Lawyers have pierced the veil in Nevada particularly on single member managed LLCs. Nevada courts tend to pro-business in general. Also, the major law firms I found don't have offices in Nevada.
But all this amounts to a lot of wasted money. Make at least million first and then hire an asset protection to help protect your assets.
There are much less expensive asset protection strategies like investing out of a self-directed IRA or self-directed solo 401(k). Asset protection attorneys are biased because they would be happy to take your money.
Read the book "Lawyers Are Liars" by asset protection attorney Mark Kohler.
Listen to @Nicole W. (good advice....just don't forget to go to IRS.gov to get your LLC's EIN before going to the bank). It's free to get one online and super fast.
By the way, Nicole, I grew up in Owen Brown. (Talbott Springs Elementary, Owen Brown Middle, Oakland Mills High, class of '94).
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