LLC in Philadelphia PA

7 Replies

Hi there, 

I am sure this is old hat to many of you. Would love to understand important points in setting up an LLC in Philly. My goal is purely to protect my personal assets from lawsuits that may occur with rental properties that i have in Philly.

1) Is there an advantage to setting up the LLC in Pennsylvania vs another state?
2) Is it important to set up an operating agreement for the LLC. Who does that?
3) Does the LLC need to have separate bank accounts. Or can it pass through to my accounts.
4) Given the goal is to protect my personal assets, i would put multiple properties into one LLC. Is that sensible?

Thank you in advance 

The LLC will be defined on the state level (a PA LLC) vs. in Philadelphia. See also PA business entity search for forms or looking up other companies. For the questions:

1. Set the LLC up where your property is located.
2. An OA can be written by you or an attorney. If this is a single member LLC, many people forgo the attorney and write their own OA
3. Separate accounts
4. Yes

@Nathan J. , for a few hundred $, there are many online resources who will create a LLC for you. They will typically also provide an Operating Agreement and EIN (Federal tax number). I am assuming this LLC is not being formed from funds from a Self Directed IRA, which requires a special Operating Agreement and there are specialist for this.

There are pros and cons of incorporating in PA. If your entity is registered outside PA (e.g. Delaware), it may be required to pay taxes in PA.

I will also point out that if you plan to purchase properties in the name of the LLC, then hope these are cash purchases or you have secured financing for the LLC, which is typically more of a challenge than personal financing.

Consult your lawyer and accountant for the best option for you.

Hi, Nathan J.

The Gentleman's name is Sean McKay. They manage over $300,000,000.00 in assets. The value to Sean is that he is local. I see him at several real estate investing meetings. People cannot give you bad service and still look at you in the face as easily. Also, if you need you help on purchasing wholesale properties or mentorship I can help you with this. I have a meet up group where people can come and get IRA and 401K education monthly. We also meet up with Flippers and Buy and Hold Investors weekly to discuss the business and how to run things more efficiently and effectively. The goal here is to put everyone in the same room. This builds reputation, education, and strong business relationships. Check out the meet up.

Thank you

thank you @Chris Martin and @Percy N. . Those are all good points

Is the separate account requirement to prevent the corporate veil being pierced. Do the separate accounts really achieve that?

@Nathan J. , that is the purpose of the separate accounts.

It is quite simple to create new accounts. I use a large bank that does not charge too many fees, but you could easily setup an even cheaper account with a local bank and establish a relationship with them.

Cheers

Percy

Also, the separate account makes it much easier to track the transactions for tax purposes, IMHO. You can simply automate it via Quickbooks or similar and not have to worry about it.

Originally posted by @Nathan J. :

Hi there, 

I am sure this is old hat to many of you. Would love to understand important points in setting up an LLC in Philly. My goal is purely to protect my personal assets from lawsuits that may occur with rental properties that i have in Philly.

1) Is there an advantage to setting up the LLC in Pennsylvania vs another state?
2) Is it important to set up an operating agreement for the LLC. Who does that?
3) Does the LLC need to have separate bank accounts. Or can it pass through to my accounts.
4) Given the goal is to protect my personal assets, i would put multiple properties into one LLC. Is that sensible?

Thank you in advance 

Nathan, we have our CPA set ours up, OA and all. He could likely advise you on the above questions too and he's a RE investor to boot. It sounds like you've gotten some good advice here so far but it's generally worth what you paid for it :) 

We don't have any single member LLC's but I don't hear much good about them as far as protection. We have corp meetings, keep minutes, and keep all the finances separate. Not sure how you have a corp meeting with yourself? Certainly don't do it in a coffee shop or some other public place!

Let me know if you'd like our CPA's info. We also have a great lawyer that has helped us get set up for rentals (although we have none yet) with an LLC and an LP. This may be an avenue for you to explore as well. Our lawyer advised on the structure and our CPA set them all up.

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