How do we set up a corporation for flipping and apartment houses?

Question

We are needing to set up a corporation for house flipping and possible apartment houses and maybe commercial properties. How does one go about this, what is the best way to set it up and what are the normal fees to do so? Please feel free to point me in the right direction of someone to talk to about this topic.

Jacob White · Answer

If you know which kind of entity you'd like to set up, go to the Arkansas Secretary of State's website at http://www.sos.arkansas.gov/BCS/Pages/corporations...

You can file electronically but you'll need to set up an account.  Alternatively, you'll need to go there in person to file.  Call them up and check that your entity name isn't already taken.

Depending on the complexity of what you're trying to do, it may be worth it to pay an attorney $500 to set this up for you.

Mark Rogers · Answer

I agree wholeheartedly with Jacob.  Setting up a simple LLC is no problem using the Secretary of State's site.  If you want to add a few bells and whistles, an attorney is a good idea.  For example, if you want to set up an LLC and make an S corp. election for tax purposes, you need to be careful about how you structure your operating agreement to reduce the risk that the IRS might take the position that you don't qualify as an S corp and decide to treat you as a C corp after the fact, with added taxes, penalties, and interest.   You might also want to talk to a Third Party Administrator about setting up a 401k plan for the company.  You might also want to form more than one entity to handle different pieces of the puzzle: maybe one entity for your flips and one or more entities for your rental properties.

Diane Trotter · Answer

Hi Mark, I set up my LLC with articles of organization about two weeks ago.  When you go to the online site, you can search the name to see if it is in use.  It cost me $50 to set up Mildor LLC in Arkansas.

Paul Thompson · Answer

Step 1. Write a business plan out. yup I'm serious. It only needs to be a few pages but do it. I promise you in a year or two it will be wrong but... as Dwight D. Eisenhower stated "In preparing for battle I have always found that plans are useless, but planning is indispensable."

Step 1. Join your local REIA if you haven't already

Step 2. Talk to a good accountant that knows about real estate investing (preferably one that owns property also). Share you business plan and ask for advice on how to structure your company(s)

Step 3. Open said LLC or Corporations with SOS website. Don't pay a service to do this. It is very easy. You accountant can give you general direction here. Generally speaking for earned income activities (flipping, rehabing, wholesaing) you'll create an LLC and have it taxed as a S-Corp. For rental properties which is investment income you'll create an LLC with the default tax status as sole-proprietor or partnership.

Step 4. Start shopping and make offers (know your numbers and know what you want a deal to give you ROI, CoC, Cash flow, Cap rate, risk, etc).

Step 5. Once you negotiate a serious deal and have something under contract (with contingency clause for inspection) share the general info with your now good REIA friends (don't include actual address unless they are REALLY good friends, on the BP community for review (don't include the actual address) or trusted advisers. There is safety in a multitude of counselors then ultimately do what you believe to be best.

Step 6. Get your inspection. Ask your friends some more questions.

Step 6. Line up your funding (this should be from your business plan)

Step 7. If it's a big deal (like an apartment complex) meet with a real estate attorney (preferably one that owns real estate investments). This way he can give you business advice instead of just legal advice. Both are valuable.

Step 8. Close!

Best of luck to you!

Wayne Brooks · Answer

Step one...talk to your CPA, as the purposes will be different for flipping type income, verses passive rental incomes.

Thelonious Jones · Answer

Go to the Arkansas Sec of State and apply for a corporation or hire a company like legalzoom or use rocketlawyer

How do we set up a corporation for flipping and apartment houses?

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