Forming an LLC

34 Replies

Has anyone formed an LLC using the Nevada Corporation Headquarters. I'm looking to create one there for the corporate veil protection but I've never done one before and I'm hoping for any insight BP has??? Specifically to protect my business assets from my personal assets.

Danny, I live in Texas, which has almost exactly the same type and level of protection. Here in Texas, people with serious need for asset protection often utilize a technique called the Texas 2 Step. They have 2 primary LLC's, basically a holding company with. A holding company. One in Texas, usually a Series LLC, which is held by an LLC in Nevada. If you want additional details check out www.lonestarlandlaw.com.

Hattie thank you for the reply. So the two primary LLC's I'm guessing would be for let's say your buy and hold properties and the other would be for personal assets. I'm basically looking for protection in the following way.

I have my personal residence and then some rental properties. I'd like to protect my personal assets ie my house and liquid cash from any potential issues from my rental properties. I believe its called the corporate veil.

I'm also working with a business partner to buy and flip properties so I'd like to keep those separate from my personal rentals and assets.

Hope I'm not confusing you just really trying to wrap my head around this.

Thank you for the link as well!!

I went to college in Texas for two years on a baseball scholarship...love the state!!! Made some great friends out there!

I love baseball!!

disclaimer...I'm not a lawyer and this isn't legal advice!

The idea of the 2 LLC structure is more obfuscation than anything else. The corporate veil is achieved with a single LLC, and it doesn't need to be in a different state. What you achieve by layering is making it very difficult for people to figure out where the money is. Why?

Because in civil cases lawyers work on contingency. Unless you're dealing with a case of true, obvious negligence, a lawyer is going to want to know there are assets to attach, before they will even take a case. By making it difficult to find assets you make it less than enticing to sue you. Combined with an umbrella policy, it's powerful protection. 

As far as the structure, your personal assets are separate from the LLC assets and liabilities, unless you do something to pierce the corporate veil. I recommend putting all your personal real estate in blind trusts. Your holding company LLC (TX or NV) should hold the title to all your property. However, your Holding company's name should never appear on any transaction. Your operating LLC is the LLC that you do business through, but even then the business is further obfuscated by a DBA.

Again, Lone Star Land Law explains it much better than I can, but that's the idea. 

Really informative stuff and I truly appreciate the time you spent replying back. It was a huge help. I definitely have a better idea and will also read the link you mentioned!

Thanks again.

Hey guys,

I'm new to REI and this forum and I have questions about LLC formation as well. How do I get someone to look at/answer my question? I'm not understanding how this works...

Welcome Gina I'm new too but BiggerPockets is the right place to be. Hattie has given me some good feedback in regards to an LLC. See the above posted link she recommended.

I'm looking to form an LLC for asset protection and seperate my business and personal assets. Not sure what your situation is but I currently have a rental property and looking to buy and hold more properties and want those separate from my personal assets. I'm also going to be flipping properties....hopefully successfully and want those to be seperate too.

This forum is great to just put the question out there and get great feedback from the seasoned investors on this site!! Just click on the main dashboard hit the ask question button and input what you want to ask and the general topic of the question and post it and people will start helping out.

Hope this helps and welcome to BP again!!!

@Danny Cerecedes

It really depends.  I wrote our operating agreement myself.  It's 23 pages, including the Exhibit for Membership and plus a couple of Addendum.  I don't believe NV is expensive to file, which is why it and Texas are desirable.  It cost me ~$350 to file the certificate of formation with the Secretary of State.  The franchise tax in Texas is < $500/year, unless you are making a lot of money...

  • 1.0% (.01) for most entities
  • 0.5% (.005) for qualifying wholesalers (not REI!!) and retailers
  • 0.575% for those entities with $10 million or less in Total Revenue (annualized per 12 month period on which the report is based) electing the E-Z Computation

So, your biggest cost is going to be the attorney you use to draw up your OA and file your formation papers with the appropriate Secretary of State.  Can't even take a guess at that one, but I would start with $2k and go up from there.

Account Closed

It sounds like you may have posted a question and not received any answers, is that the case?  If it is, try this trick..

Post your question again and mention my first name in the post.  I have a keyword alert set up on my name, which will allow me to easily find your post.  I'll guarantee you at least one response.  But, I have enough people following me that other people will actually see your post and should respond!  Just a little trick of the trade!  :)

Good Stuff!!

I have a meeting set up with the Nevada Corporation Headquarters and this is what they offer:

 Nevada Business Entity (Corporation or LLC)

  •  Articles Filed in NV, Bylaws/Operating Agreement, Deluxe Corporate

    Record Book, Custom Embossing Seal, Stock Certificates and Ledger

  •  Tax ID number acquired with S-election filing
  •  Initial List of Officers/Directors or Managers Filing
  •  State of Nevada Business License Filing

     90 Day Corporate Consulting Membership

 Personalized corporate coach assigned to you and your business startup

needs. Call as often as you want to get one-on-one support from one of our experienced corporate experts.

 Certificate of Good Standing

  •  Required to register in your operating state.
  •  Includes all documents, preparation and assistance in completing the order

    to be compliant in your operating state.

  •  Includes Nevada state fee to acquire your certificate.

     $100,000 Personal Liability Guarantee

  •  $100,000 worth of relief if your corporation or LLC's corporate veil is

    pierced in the State of Nevada

  •  Pledges the integrity of your corporate veil and gives you the peace of

    mind you and your family deserve

    COST would be $1100 to set up.

    Your thoughts??? 

Originally posted by @Hattie Dizmond :

Danny, I live in Texas, which has almost exactly the same type and level of protection. Here in Texas, people with serious need for asset protection often utilize a technique called the Texas 2 Step. They have 2 primary LLC's, basically a holding company with. A holding company. One in Texas, usually a Series LLC, which is held by an LLC in Nevada. If you want additional details check out www.lonestarlandlaw.com

Hattie: the Texas 2 Step typically refers to having a holdings company (usually a series LLC) and a management company (series or traditional LLC), regardless of state of ownership. Nevada is used for anonymity and geographic distance. Nevada has more protection than a Texas LLC in that they have much stronger anonymity laws on the books than Texas.

Originally posted by @Danny Cerecedes :

Good Stuff!!

I have a meeting set up with the Nevada Corporation Headquarters and this is what they offer:

 Nevada Business Entity (Corporation or LLC)

  •  Articles Filed in NV, Bylaws/Operating Agreement, Deluxe Corporate

    Record Book, Custom Embossing Seal, Stock Certificates and Ledger

  •  Tax ID number acquired with S-election filing
  •  Initial List of Officers/Directors or Managers Filing
  •  State of Nevada Business License Filing

     90 Day Corporate Consulting Membership

 Personalized corporate coach assigned to you and your business startup

needs. Call as often as you want to get one-on-one support from one of our experienced corporate experts.

 Certificate of Good Standing

  •  Required to register in your operating state.
  •  Includes all documents, preparation and assistance in completing the order

    to be compliant in your operating state.

  •  Includes Nevada state fee to acquire your certificate.

     $100,000 Personal Liability Guarantee

  •  $100,000 worth of relief if your corporation or LLC's corporate veil is

    pierced in the State of Nevada

  •  Pledges the integrity of your corporate veil and gives you the peace of

    mind you and your family deserve

    COST would be $1100 to set up.

    Your thoughts??? 

I think you should talk to a Nevada lawyer first. Sounds more like an insurance product than a legal service. You want a lawyer to form the LLC, not a non-lawyer.

Originally posted by @Hattie Dizmond :

I love baseball!!

disclaimer...I'm not a lawyer and this isn't legal advice!

The idea of the 2 LLC structure is more obfuscation than anything else. The corporate veil is achieved with a single LLC, and it doesn't need to be in a different state. What you achieve by layering is making it very difficult for people to figure out where the money is. Why?

Because in civil cases lawyers work on contingency. Unless you're dealing with a case of true, obvious negligence, a lawyer is going to want to know there are assets to attach, before they will even take a case. By making it difficult to find assets you make it less than enticing to sue you. Combined with an umbrella policy, it's powerful protection. 

As far as the structure, your personal assets are separate from the LLC assets and liabilities, unless you do something to pierce the corporate veil. I recommend putting all your personal real estate in blind trusts. Your holding company LLC (TX or NV) should hold the title to all your property. However, your Holding company's name should never appear on any transaction. Your operating LLC is the LLC that you do business through, but even then the business is further obfuscated by a DBA.

Again, Lone Star Land Law explains it much better than I can, but that's the idea. 

 A blind trust is not applicable to most REIs unless they're a politician and must have a blind trust. A blind trust is used so that the beneficiary (you) don't know how the trust is invested and to avoid conflicts of interest (think the President of the United States). 

You're probably trying to say put real estate into trusts for anonymity purposes, which is not always the best thing to do as trusts don't have any liability shield. It's better to have an LLC own the real estate, and then have the LLC either be managed by, or owned by, the anonymous trust.

Originally posted by @Danny Cerecedes :

Hattie,

Do you buy chance know what the typical startup cost to form my own LLC is? Forgot to ask you that?

Thanks!!

That's going to be jurisdiction dependent. You really should consult a lawyer in the state where you're trying to form an LLC. These documents need to be precisely drafted; DIY is not recommended.

Hi James,

So Nevada Corp Headquarters has an in house legal department, CPA firm as well as business funding and credit experts.  Not sure if an in house legal department means they have in house lawyers that write up the OA? 

Thanks for your thoughts!!

Open to any and all info that will help me make the right decision?

James,

It looks like you are from California. Is there a reason why your electing to incorporate in Nevada? Is that where your property is? Is it to save on taxes? Another reason?

If you incorporate in NV and your property is in another state, say California, you will need to register the foreign corporation with that other state, which can cost more than the NV incorporation.

Also, if your property is in another state that does have corporate income taxes, you will need to file a corporate tax return in the state where that income was generated.

I would recommend you consult with an attorney and and accountant to ensure you are making the best decision.

Steve

Hey Steve,

I'm looking to incorporate in Nevada for the protection it seems to provide rather than CA incorporation.

I own a rental property in Kansas City and looking to acquire a few more.

I'm also looking to start flipping in CA so I will need to register with the Secretary of State in Ca if I'm not mistaken.

I'm looking to separate my personal assets (my home in CA) from business assets and from what I've read it seems that Nevada incorporation has the best corporate veil.

Your thoughts? 

Danny,

Nevada has a good corporate veil, but for small business or a few rentals, I personally would not incorporate there unless there was another compling reason.

You mentioned your rental is in Kansas City, is that where your looking aquire others? If so, than Kansas LLC. If not go where you think most of your properties are going to be located.

Also any assets in the LLC can be attacked if the LLC gets into trouble. Therefore, I would recommend separate LLCs for each distinct partnership or business. I would keep personal assets out of the LLC. But, if you don't have it already look into a umbrella liability insurance policy.

Steve

@James Miller

I think I was pretty clear that I'm not an attorney. However, if you read the entire context of my point around the Texas 2 Step is that locating the Holding Company in NV significantly muddies the water even further in obfuscating who actually owns and operates an LLC.

Also, I mispoke about the trust...I mean anonymous trust, not a blind trust.  The point being to conceal the owner of the property.  Again...not a lawyer.

Originally posted by @Hattie Dizmond :

@James Miller

I think I was pretty clear that I'm not an attorney. However, if you read the entire context of my point around the Texas 2 Step is that locating the Holding Company in NV significantly muddies the water even further in obfuscating who actually owns and operates an LLC.

Also, I mispoke about the trust...I mean anonymous trust, not a blind trust.  The point being to conceal the owner of the property.  Again...not a lawyer.

 You were clear that you were not an attorney. But you were giving incorrect advice. No offense intended. 

@hattie,

for some reason I can't tag you in my post. As you can see above, I cannot "@" you either. Please see post here:

http://www.biggerpockets.com/forums/12/topics/207174-hey-at-hattie-i-have-a-question-about-llc-formation

Originally posted by Account Closed:

Hey thanks to everyone for the tips, Hattie, I will use your suggestion. And sorry @Danny for hijacking your post! I'm off to start my own I swear

No worries Gina that's what this is all about helping each other!!!