San Antonio, TX · Member since 2018 · 4 posts · 0 votes
I have decided to become a passive investor in MF. I am just starting out and my research indicates the syndication will create a LLC so there does not seem to be a need for me to create one. That said, should I open a business bank account in my own name as a sole proprietor or create a DBA to protect my SSN? All I am providing is capital into any deal for now... Your help is appreciated.
You do not need to have your own LLC if the syndication is setting one up. You COULD and your LLC would be part of the new LLC not it’s not necessary. You’ll get a K-1 from the syndicator’s LLC at the end of the year for your taxes. Please check with a professional regarding your own tax and liability implications, I’m answering from my own personal experience.
You do not need to have your own LLC if the syndication is setting one up. You COULD and your LLC would be part of the new LLC not it’s not necessary. You’ll get a K-1 from the syndicator’s LLC at the end of the year for your taxes. Please check with a professional regarding your own tax and liability implications, I’m answering from my own personal experience.
@Ron Willbanks If you're a passive investor (aka limited partner) in an LLC, then as @Lee Ripma correctly stated you do not need another LLC as you're not personally responsible for the syndication and the syndication is going to be set up as LLC already.
If however it is your business that is investing in a syndication then it may change. So a lot depends on what is it you're trying to do. Keep in mind tax aspect may be different from a legal one, so you may want to consult with both: an attorney and a tax accountant.
Disclaimer: I am neither tax or legal professional so this is based solely on my experience.
If you would like more details about my personal experience feel free to PM me.
I have decided to become a passive investor in MF. I am just starting out and my research indicates the syndication will create a LLC so there does not seem to be a need for me to create one. That said, should I open a business bank account in my own name as a sole proprietor or create a DBA to protect my SSN? All I am providing is capital into any deal for now... Your help is appreciated.
"create a DBA to protect my SSN?" To protect your SSN in this venture you can set up a single member llc to avoid providing your SSN. Remember, you are creating an extra tax layer and you should speak with your tax professional about the added cost.
Agreed. No need for an LLC from a liability perspective. It will also offer nothing in terms of tax benefit. Will cost you time and effort to create and maintain the LLC and then you have to have a separate tax return prepared for it.
I've invested in a dozen syndications using my personal SSN. Just be sure you vet your sponsors well.
Actually should have mentioned that I never take SSN via email. I prefer to have the investor call me with it. I then save or scan everything to an encrypted drive and shred any paper. Ask your prospective sponsors how they handle sensitive/personal data.
@Ron Willbanks it is not necessary, but could offer a layer of protection, however, you are already going to be a limited partner and if the LLC buying the property is set up properly, then you should be fairly sheltered, especially if you aren't signing on a loan.
Most of my investors sign in their personal name, but we do have some that prefer using an LLC or trust. Either way it is the same to us as a sponsor.
@Ron Willbanks I've seen people do it for state of mind and also to partner with others so that they can each invest half of the minimum in double the number of deals (to increase diversification) but, as others have said, it's not necessary if the Sponsor structures efficiently.
Unless you have a special circumstance, it's kind of a waste of money.
If your goal is to protect your SSN, you can get an EID (Fed Tax ID) from the IRS by applying for one as either a sole proprietorship or an LLC.
If you're not paying expenses, I don't see the need to set-up a separate business banking account unless you really want to. Of course you can do it to easily track income.
My 2 cents is save your money and don't do the LLC unless you need one. If you want to shield your SSN apply for an EID as a sole proprietorship. The EID is nice because in some ways it doesn't matter who sees it (within reason).