New Member (501 C3 and LLC incorporation)

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New Member (501 C3 and LLC incorporation)

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Member since 2008 · 4 posts · 0 votes

I found your club through myspace.com. I spent the better part of the day reading through threads and posts of which I found very informative. However, I did not find anything about starting a leasing company or creative ways of using a non-profit organization to purchase property. So my question is where can I find information about starting a company that specifically deals with investment properties? For instance, what is the best type of for profit/not for profit charter I can use that will serve the most benefits? Judging by what I have heard, there are a lot of tax benefits in incorpating and passing that money through a non profit. Luckily, I own a non-profit and a LLC already. However, the non-profit I owned will have to be change to fit within the framework of this purpose. As for my LLC, I can either change it to include more functions (presently it is organized as a marketing company), or form a new company to fit this particular purpose. All comments regarding this manner will gladly be appreciated. Thanks for reading and it is my pleasure to be part of your community!

Chris

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  • Frank Adams
    Loveland, CO · Member since 2008 · 1k+ posts · 123 votes
    20y

    There's no info on using a non profit because that's not the purpose of non-profits. You want to make profits so putting investments into a 501c3 would be illegal.

    You say you want to start a company that deals with rentals. Deals with them how? Do you want to own rental ppty, just buy them. If you want to manage ppty for others you'd probably be best served by getting a RE license and obtaining the appropriate credentials; ie, initials behind your name.

    good luck

    all cash

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    OP
    Member since 2008 · 4 posts · 0 votes
    20y

    Thanks for your response!

    Being that I'm already operating a non-profit organization, there is a way to make a donation to my non profit and receive some tax benefits from it. Also, I can probably start a foundation and pass funds through it so I can then offer it as a grant to my non-profit organization. The money would be better spent giving it to challenging youth than giving it to the government. Also, I can also made donations to other non profits and received a tax deduction for my efforts. It's not like these organizations aren't proving service. They have been providing services for over 10 years.

    By the way, are you a tax expert? If not, maybe someone who is a tax expert can give me some advice on how I set this up. Thanks for your response when given.

    Chris

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  • Bryan Casteel
    Real Estate Agent · Cincinnati, OH · Member since 2008 · 216 posts · 11 votes
    20y

    Chris,

    Welcome to BiggerPockets and we look forward to you contribution.

    I am not a tax expert and I would never consult any free source of information for tax, legal or accounting advice. From your explanation, your experience with non-profit organizations is more experience than 99.9% of all of the people on this board. These boards are best used for the nuts and bolts of real estate investing and they are very good at that. Hire a lawyer to answer your questions.

    I have seen several non-profits around Cincinnati who purchase and rehab homes, but, as far as I know, the entire profit and loss of each project is contained within the organization and the profits are used to further their main cause. If you are looking to personally profit (other than a salary) from your own not-for-profit company, then, as all cash said, you will most likely be on the wrong side of the law.

    As far as LLC's are concerned, that is a great way to invest. They are a nice "bucket" to put your income and expense numbers into and a good way to limit your liability personally. Since you already have one set up, all you have to do is modify your operating agreement to reflect a new direction of real estate investing. When you purchase or sell homes with the LLC, the title company or lawyer doing the closing will need to have a copy of your operating agreement and tax ID for the closing file.

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    OP
    Member since 2008 · 4 posts · 0 votes
    20y

    This is helpful information Prohabber. Thanks!

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  • Jeff Takle
    Real Estate Consultant · Somerville, MA · Member since 2008 · 339 posts · 52 votes
    20y

    Also, in the future, you may wish to include the following language in your Articles of Formation (or whatever they are called in your state) when starting an LLC, and in your Operating Agreement:

    Purpose for this company is: "To provide any and all other services allowable under the laws of this state."

    You can check with your state's corporation commission or comparable agency for the specific language. You don't really have to be very specific with what your LLC will do when you form it and, I've never seen a benefit to doing so. Having this language in your documents opens the door for jumping on opportunities as they present themselves. Also, I'm not a tax/legal guy either, but I first read this in a NOLO How to Start an LLC handbook, checked with my State Corporation Commission (who licenses LLCs in VA and MA) and they ok'd it and I've used it for four years, without problem so far.

    While I agree with allcash and biggerpo about intentionally violating the tax regulations, I like what you said about donating some of your profits to a charity. It's nice to hear someone talk about something other than just pure profit--though admittedly I don't know your intentions. I started a scholarship that sponsors energetic and promising young people that I meet in my travels and work who agree to meet certain academic standards of performance and attendance in return for half-tuition. Good way to contribute % of annual income and, yes, that reduces my taxable basis. I've also adapted a business model where 10% of every major good deal that goes through, gets funneled directly to these kinds of efforts--kind of helps keep me humble, oriented on what's really important, and makes sure it doesn't get brushed to the sidelines in a money making bonanza. If that is your intention, then please consult a tax attorney familiar with charitable organizations and come back and post the results!

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    OP
    Member since 2008 · 4 posts · 0 votes
    20y

    Thank you for your elaborate response. The information you shared in your post is very resourceful and kindly appreciated. It is definately something to considered in the near future and am very appreciatable that anyone would take time to explain this to me. With that said, I will continue to check in with this community and look forward to keeping you all updated on my progress. Thanks again Takleberry!

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  • Dick Green
    Residential Real Estate Broker · Conroe, TX · Member since 2008 · 1k+ posts · 43 votes
    20y

    Really enjoyed all the information generated by your question.

    thanx

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