Should I start my own LLC?

9 Replies

I will hopefully be beginning wholesaling within the next few weeks and I just had a simple question. Should I start an LLC for my real estate business? There are benefits to this, right? If so, what are they? Any help/guidance would be awesome!

Hey @Scott Autenreith I am not an expert on this but I am about to put my two current rentals into their own LLCs (and should have a long time ago) because each LLC is a separate legal entity. As I understand it the primary reason to put your real estate business in to LLCs is asset protection to limit your personal liability.

If something happened (knock on wood) and a property of yours got sued (rightfully or not) and you owned the property traditionally, you could be sued for any amount of your personal assets (house, car, wage garnishment...). If the property was owned by an LLC and was sued, the legal action would only pertain to assests owned by that LLC (hence the one for each property idea).

If it were me, I'd make some money first and then look at forming an LLC. But coming to Bigger Pockets is a great place to learn about the pros and cons of an LLC! All the best!

@Scott Autenreith so this is the part where I have to do research myself. I am under the impression that a lawyer can help you set up your first one and that its just a matter of filing it properly, which varies by state. I've heard that you can do subsequent ones yourself after you have the paperwork and understand the process.

It's super common practice so I'm sure nearly everyone here can answer...

In Washington State, you just go to the Secretary of State website and fill out the form, pick a name,  and pay $200. It took about 10 minutes. Not sure about Arizona...

I am just getting started in real estate investing, but Anderson Advisors is helping me set up a C corporation and a LLC before I get going. Part of the reason for this is to help convert my IRA into a solo 401k, but I feel better having the structures for tax purposes and for liability protection.

Originally posted by @Scott Autenreith :

Thanks @Madeline Burke . If I wanted an LLC, where would I start?

Scott, you could start by chatting with an Arizona licensed attorney that works almost exclusively with real estate investors, including wholesalers, to determine when you should set up that LLC and discuss how it should be taxed, etc. I happen to be one if you'd like to chat.

I would encourage you to speak with both a good tax accountant familiar with real estate investors and an attorney.  Creating a firewall of protection is definitely a good idea, but you want to make sure you are following the right path and putting yourself in the best possible position tax wise.

@Scott Autenreith ,

I'm not a legal or financial professional, and this is not advice. Contact your own professional for advice.

That said, for wholesaling or any other short-term cash flow, you want an S-corp.

LLCs are for long term holds.

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