To form a LLC or wait?

Question

We have reached out to a couple of local investors and we are getting mixed thoughts. One investor suggested to form a LLC and buy properties through a business. They said it would protect us if things go wrong. The other said it wouldn’t benefit us through taxes and fees with the start up... What would you guys think?

Account Closed · Answer

@Jered Noland

I can go either way on LLC's. For me, I knew I wanted a business of many properties, so I created an LLC immediately. I liked the psychological aspect of doing it, because it made me feel like "now I have to accomplish my goal!"

Jeffrey L. · Answer

@Jered Noland One way to consider whether to LLC or not is how much you want to protect your personal assets and if the additional costs / efforts justify it?  As an example, if I am a fresh grad living with my parents and owns nothing, I will just go with personal, because it's easier to get mortgage, less tax filing headache, less costs overhead.

If I am a little later in life, say a spouse and some kids, own my primary residence, and don't want to start my life over if someone falls on my rental and sues me, having an additional LLC layer provides some peace of mind.  Remember, LLC exists for a reason, it is a matter of whether you can leverage its benefits at your current situation.

Some may say, and I agree, that you can protect your personal assets via an insurance policy.  That is true too, but I don't want to get too off topic here. =)

Jered Noland · Answer

@Jeffrey L. Thank you

Kathy Calderini · Answer

@Jered Noland I would contact a CPA to see if/what benefits there are to an LLC. I would also contact a lawyer to inquire about the protection an LLC gives you.

LLC’s are easy to set up, just check with the Secretary of State in your State to get the paperwork completed and sent in. Most states it of all done electronically.

There are Lenders that will lend to 80% loan to cost and 65% loan to after repair value with a new LLC and no experience.

Hope this helps!  Make it a great day!

Jered Noland · Answer

@Jaysen Medhurst

Thank you for the input

Jered Noland · Answer

@Kathy Calderini

Thank you

Jaysen Medhurst · Answer

@Jered Noland, don't obsess about the LLC thing. Find deals, close deals. LLCs are quick and easy to set up. You can move a property into a LLC when the time is right.

You won't be able to get a mortgage in your LLC's name until you've had at least 2 (profitable) years. A LLC is a pass-through entity, so no, it won't help with taxes or fees.

To form a LLC or wait?

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