Does a two-month flip necessitate and LLC?

Question

Hi everyone,

I am currently under contract on my first flip property.  The work on the property is not terribly extensive and should be completed in 2-3 weeks.  I'm wondering if it still makes sense to put this property in an LLC even though I will only have it for a short time.  I do plan to do more flips afterward if that enters into the equation.

Linda Weygant · Answer

Hi @Nick Brubaker - sounds like you've got a ton of questions that I could probably address from a tax standpoint (not a liability standpoint).  Hit me up with a private message if you want to set up some time to talk.

Matthew Kreitzer · Answer

Contracts have already been executed and you signed individually? Depending on more information, you may have already obviated any benefit an LLC could have on potential liability. Hard to say without sitting down with a licensed, local attorney to review all the facts of your case. Mr. Soignier has it right, it only takes one screw up for your entire life savings to go away.

Chris Soignier · Answer

All it takes is one day for a contractor or handyman to fall off a ladder, shoot themself w/ a nail gun, etc.        Even after the work is complete, prospective buyers and agents could hurt themselves while touring the property.   BTW, flips almost always take longer than expected!

Nick Brubaker · Answer

Thanks @Matthew Kreitzer  Closing might be another week.  It doesn't sound like that would be enough time for the LLC to be established.  A CPA I'm talking to said it wouldn't make a difference as far as liability, though I did question that as I would become personally present in the transaction trail?

Is it also true that it is best to avoid using your name or other personal identifiers in the LLC name?

Nick Brubaker · Answer

Thank you @Al Wilson and @Chris Soignier.  I guess I should go ahead and get the set up.  We will probably close on the property before the entity is established, but my understanding is that it is easy to transfer the property over from myself to the entity later.

I guess I should elect for the LLC to act as an S-Corporation to reduce my self-employment taxes?

Does a two-month flip necessitate and LLC?

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