Lawyer fees for starting LLC?

Question

I just spoke with a local real estate lawyer (Washington State) about setting up an LLC for buying rental properties. I have yet to buy my first property, and I was advised to form an LLC before doing so to protect my assets. The lawyer I spoke to suggested I form a holding LLC, and one LLC per property to protect each property's assets from the other properties. However, he said his firm charges $2000 to form an LLC - this seems very high to me. Is it worth paying this much to ensure I'm protected? I imagine a lawyer would do a much better job of keeping a client from piercing the corporate veil than I would if I self-managed my LLCs, but I'm not sure if it's worth fees that high, or if other attorneys would charge less.

Nghi Le · Answer

If you're just starting out and don't have many assets to protect, I wouldn't worry about the LLC.  It'd make your investing life and financing life much easier to not have it.  Focus on the things that put money in your pocket, not things that take away from it.

But always get an umbrella insurance policy; that's your best form of protection there.

If you're still wanting to get an LLC, I'd recommend @Scott Hildebrand.  Great local real estate attorney with reasonable rates.  Please don't pay $2,000 to create an LLC.

Caleb Heimsoth · Answer

@William Godbe yes my recommendation is to start buying first and worry about an llc later.

My cpa recommended to me to not even consider it until you have 7 or so and even then it’s probably not worth it.  His firm prepares tax returns for people who own 15 plus in their own name.  If you have good liability insurance it’s just as good.

I did the whole llc thing and I recommend to others now that you don’t do that at the beginning.  Not worth the money.

Plus if you get an llc and then close on a property in your name (using conventional residential financing) your only option is to then quit claim the deed to the llc and hope the bank doesn’t call the note due which in my opinion is an unnecessary risk.

Elizabeth Wilson · Answer

@William Godbe - I know the regs are different in each state, but we did it all ourselves online.  The Washington Dept of State website should tell you what you need to do to register your business.  We have one LLC for our rentals (though another one for my Self-Directed IRA).

William Godbe · Answer

@Scott Hildebrand thanks for the input, I just sent you a PM.

Scott Hildebrand · Answer

LLCs are very state specific. In California, they are very expensive. In Washington, they are quite cheap and you don't even need an operating agreement. I tell clients all the time that the key is to have some assets to protect rather than creating a box in which your assets will reside, but you have no assets to put in the box. Definitely spend some time with a CPA and attorney here...

William Godbe · Answer

@Caleb Heimsoth it would be single member, for mostly single family homes. I do eventually plan on owning 20+ properties, would it not be wise to form an LLC in anticipation of that? Can I get away without having an LLC if I own a large number of properties under my own name? Assuming I have good liability insurance in either case.

William Godbe · Answer

@Elizabeth Wilson thanks for the reply! Have you had any trouble navigating the legal-ese of complying with the terms of the LLC/making sure your personal assets & business assets aren't co-mingling? And did having an LLC make it harder to get a loan (if you got one)?

Lawyer fees for starting LLC?

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