Creating an LLC before you start investing?

Question

Hello:

I am preparing to enter into Real Estate investing (wholesaling, flipping, tax liens etc.) Is it advised to create an LLC for my ventures before my first investment?

Many thanks,

Janelle

Jason Marino · Answer

Hi Janelle,

For the type of investing that you mentioned in your post, it is a good idea to have an LLC if you are risk averse. As stated in the post above, the strength of your LLC depends on how well it was created and how it is run. In addition to filing the LLC with the Secretary of State, you will need to create an Operating Agreement to control how the entity functions. Additionally, you should have an EIN, and the LLC should have its own bank account. In relation to running the LLC, keeping a book of business, maintaining the LLC in accord with the compliance that the Secretary of State requires (if applicable), and having an annual meeting are things that you should consider doing.

Joseph Crunkilton · Answer

No. It's a lot of paperwork and fees that you don't need. I'd consult an REI attorney only when you have a significant portfolio. Take this from someone who has built multiple LLC's for REI ventures.

Sanat Bhandari · Answer

@Janelle Niles While it is not absolutely necessary to create an LLC, I highly recommend that you should since it shields you from the potential liability of any of the investment strategies you mentioned. Feel free to DM me if you'd like more info on the same.

Eliott Elias · Answer

Yes, it's cheap and will make record keeping easy. Open a business bank account as well.

Pepper Bradford · Answer

I asked this same question on another forum here and got the exact opposite answer...everyone said it wasn't necessary until you reached a certain size.

Ana Nuckols · Answer

Your LLC is only as good as your record keeping and organization. If you create an LLC and also open up a business checking account and keep everything related to the investment (expenses, etc.) coming in and out of that account that makes for less liability. However, any good lawyer could punch holes, if necessary, in a worse case scenario through your LLC/liability, etc. With all that being said, we do have LLC's and feel it is better to have some line of defense versus none.

Janelle Niles · Answer

Thank you all for your replies!

Best Regards,

Janelle

Janelle Niles · Answer

Thank you all for your answers!

Creating an LLC before you start investing?

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