L.L.C

5 Replies

Hi everyone,

Couple questions. 1. Should I start a LLC when I purchase my first rental property.

2. If I purchase a property in Pennssylvania and my residence is in NY where shouls the LLC be.. Can it be in NY?

Thanks

Are you purchasing cash or financing? If your doing financing the bank wont let you purchase in an LLC. You can quit claim ot over after you close but the home is still owned by you personally.

If the only reason you think you need to form an LLC is for protection, this is a false theory. All you truly need is the proper insurance. Most people get an umbrella policy to cover the property and others you purchase.

When you form an LLC you pay a fee to set it up and register it. A yearly renewal fee and a fee for your CPA to file a tax return. Its not worth it in the end.

Medium buymemphisnow stacksCurt Davis, Buy Memphis Now | [email protected] | 605‑310‑7929 | http://www.BuyMemphisNow.com | TN Agent # 00321765

Thanks very helpful

Originally posted by @Arthur D. :

Hi everyone,

Couple questions. 1. Should I start a LLC when I purchase my first rental property.

2. If I purchase a property in Pennssylvania and my residence is in NY where shouls the LLC be.. Can it be in NY?

Thanks

Let me start by saying I am not a legal professional.  I am not giving legal advice.  Consult your attorney if you want legal advise.  All I can give you is my experience and what I've read from credible sources. 

1.  Great question, Arthur.  I am reading How to Use Limited Liability Companies and Limited Partnerships, Second Edition by Garrett Sutton, Esq..  I believe this book, as well as his book Own your Own Corporation, make a clear and convincing case for forming legal entities when conducting business. And that's exactly what you are doing - conducting business. When you conduct business as a sole proprietor (meaning by yourself, no partner, no corporation or company formed), you are essentially telling the courts you agree to be held personally liable for your business dealings. If anyone has a real or imagined grievance, they can sue you. The prosecuting attorney will assess how far into your personal finances they can reach in order to satisfy their client. Think of everything you own that is in your name - your car, your savings accounts, your jewelry, your vacation home. They can seize it. Not so with a properly formed LLC. Real estate may also involve personal liability for leases, contracts and mortgages as well as for expensive environmental remediation and clean up. Think of whether you want to be liable for all these things too. Again, thanks to Garrett Sutton for writing the books I've mentioned.

2. Your choice of where to form your LLC is not limited to Pennsylvania or New York. In fact, I recommend you form your LLC in a business-friendly state like Nevada (read more here.). Once you've done this, your LLC can apply to do business in Pennsylvania as a foreign LLC. Wherever you choose to form your LLC, you'll ultimately need the approval of the Pennsylvania Department of State.  When the time comes, you can file the necessary paperwork on the Pennsylvania Department of State's website by clicking here.  

Read the books and articles I've recommended, then speak with a real estate attorney.  Hope this helps.

Good idea to consult with your estate lawyer about these issues. Good luck.