LLC Advice

3 Replies

Hey BP if anyone would like to share how they have their LLC set up that would be greatly appreciated!!

I've already received some info on how to set up a LLC from a different post which was fantastic.

Here's my situation. I currently own the home I live in which is in CA. I own a rental in Kansas City and plan on acquiring a few more. I'm also planning on getting into flipping here in CA.

If anyone has a similar situation I would love to hear how you have it structured? I know Im not receiving legal advice here and that ultimately I should talk to an attorney but just looking for some insight.

I'm considering setting up my LLC out of state (NV) but just not quite sure? Do I need multiple LLC's or one? I have so many questions about this topic but don't want to be greedy with anyone's time.

Thanks ahead for anyone offering some insight!!!

Hey @Danny well in this moment i have an appointment with a fiscalist and tax advisor to help me with those questions, and i'm trying to make a list of questions to pose him. don't you want to pose your list of questions? I believe that someone that has experience with that will answer what he knows, and I can use also mayse some of those questions :D

We only know what to question after we have some insight right?

Thanks
Nuno

Hi Nuno,

Here are some of the questions I have:

1. Should I establish my LLC in the state I live in?

2. Considering Forming my LLC in NV for the corporate veil protection but does it make sense to do that if I plan on flipping in CA?

3. Do I need to form a LLC in the state I have rental properties. I own a property in Kansas City and plan on acquiring more.

4. Can I establish one LLC with a series of LLC's within that one entity to hold my flips and maybe even my rentals?

5. If I establish out of state do I pay for that LLC annually as well as my foreign filing fee in CA and the franchise tax fee?

Lots of questions and I know I need to talk to an attorney? Some people have told me that it's not a big deal not to have a LLC but I just feel to exposed if I don't.

Thanks for your input!!!

I am not a tax advisor, nor an attorney.  I am, however, an investor who has been around the block for the last 18 years.  I am going to make the assumption that your intention is to run a legal enterprise and not trying to evade taxes or screw vendors, customers, etc.

For most of your questions, the answer is going to be "it depends on what exactly you are going to do."  In general, Flipping is a much different business than holding for rental, so I would separate both of those activities and treat them like separate businesses.  Tax strategies and risk profiles are completely different for those two.

One concept/strategy I use throughout my life:  Anybody can make something more complex, it takes genius to make it simple.

1-2. For flipping, I would create in my own state to make it easier to transact. For rental, I would consider incorporating in another state, since you are already out of state for the one rental you have.  (I know you could incorporate in that state, but if you plan to already expand to a mutli-state portfolio, then you'd gain no simplicity.)

3. You will NOT need to incorporate in the state in which you hold rentals.  You WILL most likely be required to get a license or a certificate of authority or some such to run a business in that state if you are holding as a legal entity.  You may even need it if you hold it personally.  It depends on the state.

4. Not in my state, but YMMV.  I don't think mixing passive and active incomes is a smart move.  In my state, you typically would roll up a number of LLCs into an S-corp, which is taxed at your personal rate.  

5. I'm no attorney... check that states web site for secretary of state.  

Bottom line is:  Understand WHY you are incorporating or organizing your entity.  Sometimes, all you really want is a couple million dollars of general liability insurance.  I know a lot of investors carry $2M of coverage for around $40-50/month... I like this route, because, as I understand it, corporate veils are largely ineffectual in small businesses because they do not do the maintenance to keep them legitimate. 

Also, just carrying the insurance, you have to pay for all of the additional tax filings come April 15.  Shop around, getting taxes done on a separate legal entity usually runs $500-1000 in my neck of the woods.... every year.  Again, YMMV.

What do I do? I manage rentals through an LLC, i have another LLC which I do a few flips a year. I carry GL insurance to boot.

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