Rental Property Investor · Columbia, MD · Member since 2019 · 10 posts · 1 vote
I live in MD and am focusing on properties in both MD and NC. I've owned one rental for a few years now and want to expand. I have contacted several lawyers in an attempt to set up my LLC; however, can't get any to engage.
Any and all thoughts, guidance, or references would be appreciated.
@Account Closed yes this is great advice. I was only trying to offer a suggestion of who else can help set up an entity, assuming he knows what type to set up. Or has already been legally advised as to which is best. Sometimes these forums don’t give you all of someone’s information. What are your responses to the people that tell him to set it up himself?
Your Comment: "What are your responses to the people that tell him to set it up himself?" I've been investing in real estate for 25 years and I was a loan officer. I've battled in court and prevailed each time. Yes, there have been a few times. What I have learned along the way:
1. I do use LLCs, formed by an experienced attorney.
However, umbrella insurance is sufficient for most investors starting out.
2. Lots of people never get started in real estate because they are too concerned about forming LLCs. Ironic, isn't it.
3. You don't get sued unless you have *substantial* assets.
4. A lawsuit costs each side about $50,000 and takes about a year and a half if everything goes smoothly. Lawsuits never go smoothly. The loser can appeal. The loser can file bankruptcy and get rid of the judgment after they lose the appeal.
The winner is rarely a "winner". Lawyers will not guarantee the outcome of a lawsuit no matter how "righteous" and indignant one side or the other is.
5. Umbrella insurance prevents most lawsuits. LLCs do not scare attorneys. Often the opposing attorney will name you personally as well as the LLC anyway. You have to PROVE you are separate entities and most people don't maintain an LLC properly to prove that to a judge.
6. Most lawsuits (95%) end up in a settlement rather than going to trial. Most people will settle (even f they are not wrong) in order to avoid going to trial. Personally, if the settlement isn't in my favor I take it trial. I win because I don't put myself in risky real estate deals and I disclose in writing, everything to everybody going into the transaction at the beginning.
7. People who form their own LLC may as well do their own root canal.
8. The most expensive real estate investing is done by people who never start for want of an LLC. If you never start, you never finish the race as a winner.
I would recommend a private consultation with someone like @Stanley Bronstein before deciding if you even need an LLC.
What do you mean by them not engaging? They did not respond? Or perhaps they responded but refused. If so, have they given a reason? Maybe they just don't specialize in forming LLCs for real estate and they don't feel comfortable doing it. In that case, google a lawyer specializing in the real estate industry. There are a lot of them out there. Otherwise, you can use Swyft Filing or another online website that files the LLC for you, but I advise against this.
One was a referral from another investor, others I’ve found through searches of those that specialize in company formation.
By not engaging I mean that they either don’t respond to electronic requests from their website, or when I speak to them on the phone, they do not get back to me.
I am going to hang in there for this route. I’m not willing to go the online route.
I can't say this is the reason but in the North Eastern Real Estate market you are going through Black Friday for the next 2 and a half months. While you can't go 3 feet without being hounded in November by someone wanting to work with you, the day Income taxes start coming back, those dealing with RE forget what their kids look like. That includes the RE lawyers, mortgage reps, home inspectors, agents and plenty of contractors. So I would suggest sending a few follow up reminders to the 2 or 3 you think you want to work with and go from there.
Or else you could end up getting the ones that are not busy right now......for..... some ....... reason :)
Once you actually have a relationship you can still get through during this time. Although I know last night I was on the phone with another agent at 11:00 PM and was sending emails to an attorney at 2:00 (I got one back at 5:10AM). But starting is hard.
@Mike Flint Keep in mind many people have websites created for them and they don't get messages from their website. I'd have to think of where the messages from my Website go. I haven't look in years
Try Anthony Onwuanibe at Golden trust title, Jeff Charlow at Charlow law group in towson, Bill Chase at Chase Chase and Hamerschlag. All are real estate attorneys and all can easily handle the creation of an LLC. All ar in the greater baltimore area. I don't know of anyone in Columbia.
@Mike Flint LLCs are fairly simple if you’re the only owner. A quick search for your states official site will walk you through the process. I would recommend avoiding any companies or attorneys. Ohio is $99 and then if preferred you can request an EIN number from your state tax department. Most universities offer free small business consultation as well. They typical have guides printed to help you through the process in your state.
@Mike Flint to follow up on what @Michael P. Zembower Jr. in Maryland you can create an LLC very easily for about $75 while you wait. i didn't mention that as the important part of a lawyer is creating an operating agreement and explaining what formalities you need to do to make sure your LLC protects you.
If you don't follow the formalities of running an LLC they you might as well not have one, as it will easily be pierced. NOLO Press has some very good information on their website and good books on the subject of LLCs I have two of their books on my bookshelf.
I live in MD and am focusing on properties in both MD and NC. I've owned one rental for a few years now and want to expand. I have contacted several lawyers in an attempt to set up my LLC; however, can't get any to engage.
Any and all thoughts, guidance, or references would be appreciated.
Before you spend mucho bucks on LLCs that require ongoing costs and attention and compliance, it's likely that for your first few properties you are much better off just getting umbrella insurance. It costs less and covers more.
A good time to consider an LLC is when you have a property or two with substantial equity (for me that amount is $100,000 in a property or two). Here's the reason, if something happens and someone wants to sue you, their attorney will look at your assets before anything starts. If there isn't enough equity to sue for, he doesn't take the case.
Your insurance will cover whatever claims are smaller, that aren't worth suing for. Additionally, LLCs require ongoing attention, they have to be set up properly and you HAVE to follow the Operating Agreement in detail and consistently or the LLC does you no good at trial. That is a lot to ask of someone who is trying to make a living investing in real estate. It is detailed and time consuming and pointless if you don't follow the rules.
I agree with @Account Closed I've set up several LLCs and looking back they weren't necessary initially because there wasn't enough equity to make it worthwhile for an attorney to pursue it. However, once I've surpassed $100k equity in the asset then I'm glad I have them. If you have that value in your asset then pursue the LLC. If not, better to wait and just maintain your $1M liability policy.
You don't need a lawyer to create an LLC. You can do it yourself pretty easily. If you have more than one person in the LLC, then you'd want to seek legal counsel on an operating agreement, but the actual process of creating one can usually be done going through your state's Secretary of State website or the website of the state. I personally would save the lawyer costs of the setup and do it on my own. I did so for my own LLC and didn't have an issue filling out the requisite online forms.
Creating the LLC by yourself can be easy. Creating a good operating agreement that is tailored to your particular situation is where you might need help from an attorney.
Question - Why would the attorneys not engage? Were they wanting to charge more than you were expecting to pay?
@Mike Flint yes my accountant always sets up my LLCs
Will your accountant defend you in court if necessary? One purpose of an LLC is to protect assets, if not done properly it is useless. It's rare that an Accountant will show in court to tell the judge why they set up an LLC the way they did, and that it was set up properly and that the other side has no basis for a complaint. Who will the judge believe, the attorney on the other side or your accountant?
It's a bit like having a beautician substitute for your dentist. You may like them, but having them drill your tooth probably isn't going to go well for you.
Personally I would not even download an LLC. It doesn't give me any protection. The Operating Agreement (if there even is one) isn't specific to how I want to do business and want to be protected.
IF you're going to have an LLC, use an attorney that does them on a regular basis.
@Account Closed yes this is great advice. I was only trying to offer a suggestion of who else can help set up an entity, assuming he knows what type to set up. Or has already been legally advised as to which is best. Sometimes these forums don’t give you all of someone’s information. What are your responses to the people that tell him to set it up himself?
@Account Closed yes this is great advice. I was only trying to offer a suggestion of who else can help set up an entity, assuming he knows what type to set up. Or has already been legally advised as to which is best. Sometimes these forums don’t give you all of someone’s information. What are your responses to the people that tell him to set it up himself?
Your Comment: "What are your responses to the people that tell him to set it up himself?" I've been investing in real estate for 25 years and I was a loan officer. I've battled in court and prevailed each time. Yes, there have been a few times. What I have learned along the way:
1. I do use LLCs, formed by an experienced attorney.
However, umbrella insurance is sufficient for most investors starting out.
2. Lots of people never get started in real estate because they are too concerned about forming LLCs. Ironic, isn't it.
3. You don't get sued unless you have *substantial* assets.
4. A lawsuit costs each side about $50,000 and takes about a year and a half if everything goes smoothly. Lawsuits never go smoothly. The loser can appeal. The loser can file bankruptcy and get rid of the judgment after they lose the appeal.
The winner is rarely a "winner". Lawyers will not guarantee the outcome of a lawsuit no matter how "righteous" and indignant one side or the other is.
5. Umbrella insurance prevents most lawsuits. LLCs do not scare attorneys. Often the opposing attorney will name you personally as well as the LLC anyway. You have to PROVE you are separate entities and most people don't maintain an LLC properly to prove that to a judge.
6. Most lawsuits (95%) end up in a settlement rather than going to trial. Most people will settle (even f they are not wrong) in order to avoid going to trial. Personally, if the settlement isn't in my favor I take it trial. I win because I don't put myself in risky real estate deals and I disclose in writing, everything to everybody going into the transaction at the beginning.
7. People who form their own LLC may as well do their own root canal.
8. The most expensive real estate investing is done by people who never start for want of an LLC. If you never start, you never finish the race as a winner.
I would recommend a private consultation with someone like @Stanley Bronstein before deciding if you even need an LLC.
@Mike Flint talk to someone from legalshield. They do a great job for you to protect yourself and your business and for setting up an LLC. Call my friend Linda
@Account Closed That is great info. I have just started my journey as well, one property and offering on a few more. My accountant suggested the Llc plus an umbrella policy along with the commercial insurance for the properties. My lawyer agrees with this setup. And my accountant set up my LLC. Do you think this was ill advised? Just curious your thoughts
@Mike Flint Yes, an accountant can. My dad is my CPA, and he's done all of ours. You can also just go to the website for the Secretary of State where you live and - usually - you can find the forms needed to do it yourself. Easy. You don't need an attorney to form/file an LLC!
I reiterate. Anyone can form an LLC. Not everyone can structure the ownership properly to accomplish the desired legal and tax objectives. Also, not everyone can put together an operating agreement that accomplishes the goals of the parties.
I can't tell you how many times I've seen an individual or even their CPA form an LLC for someone and something wasn't done properly.
It's easy to form an LLC, but it's not always easy to set everything up properly.
For example. I know how to paint and I can paint my house. With all that said and done, the contractor I hired to do the job did a better job than I would have done. It cost money, but they did a better job than I would have done.
@Account Closed That is great info. I have just started my journey as well, one property and offering on a few more. My accountant suggested the Llc plus an umbrella policy along with the commercial insurance for the properties. My lawyer agrees with this setup. And my accountant set up my LLC. Do you think this was ill advised? Just curious your thoughts
I agree with @Stanley Bronstein it isn't who can form an LLC for you, or that you can get it off of NOLO or Legal shield or someplace else.
The question is "who is going to show up, in court, to defend the LLC for you".
If your accountant puts it together and you run it past your attorney and your attorney says "I will stake my reputation on this LLC and defend you in court", then by all means pay for the accountant to form your LLC And in addition, pay to have your attorney review it, if that is your insistence.
All you other lovable characters are talking about what is "easy" and then giving your opinion, which is fine for debate class.
I speak from personal experience, and I speak from fact.
In courts, facts triumph over opinion. Caveat emptor. "Let the buyer beware"