Setting up a LLC to buy properties how does the LLC get approved?

Question

What type of business is best when planning to accept funds from investors to buy and fix properties ? LLC ?

How will my investors funds be subject to taxes ?

Basit Siddiqi · Answer

@Kirollos TomaYou normally want to set up the entity in the state where you will be doing business in. You want to speak with an attorney to create the operating agreement between you and your partners/investors. This document will entail items such as each partner's responsibility, profit split, date when the entity will end, etcGood luck to your business!

David M. · Answer

@Kirollos Toma

This is confusing.  You say you have investors and ask how to take in their money.  Now, they are partners and all are active.  Which is it?

When investing with non-spousal partners, you generally need to form some of legal entity.  The LLC is generally preferred because of the limited liability afforded IF you operate it correctly.

If you are all going to be "active," your profits/losses will be split according to the Operating Agreement of your LLC (or Parternship Agreement if for some reason you choose to forgo the LLC and form a partnership).  Each of you will receive a K-1 form showing the profits/losses, and with this K-1 you can do your own personal tax return.  Either way, you will have a pass-through entity (unless you use a C Corp which is not advisable) so the tax is incurred on your personal returns.

Make sure you consult with some qualified professionals, e.g. attornies and accountants/cpa.  Good luck.

Kirollos Toma · Answer

There would be a total of 3 partners, all of us would be active with one of us being a real estate agent. We would like to keep the first property as a rental for a few years and see how it goes and hopefully acquire more

Kirollos Toma · Answer

A real estate attorney ?

Owen Dashner · Answer

There is not enough information in your post to give you good advice. How many partners? Are you flipping or keeping as BRRRR rentals? Are you/your partners active or passive investors (i.e. are any of you full-time real estate professionals)? The answers to these questions may impact how your business should be structured and taxed.Setting up an LLC can be simple, just verify the name you want is available with the Secretary of State, have your Articles and Operating Agreement created, get an EIN from the IRS, setup a bank account and you are good to go.  But if you are involving partners, you need the advice of an attorney and a CPA, period.

Sally Carr · Answer

Starting an LLC is easy and will usually be done by an accountant or lawyer. It is usually more of a send in paperwork and check than getting approved. The LLC can be structured in several different ways - partnership, corporation, etc. Taxes would be based on how the company is structured and what kind of investments your LLC makes.