Is it worth creating an LLC just for wholesaling?

9 Replies

I'm not sure if it would be more beneficial to keep all money earned from wholesaling properties separate from my income from my everyday job. Just looking for some advice on what the better play is with that.

Originally posted by @Bryan Sturman :

I'm not sure if it would be more beneficial to keep all money earned from wholesaling properties separate from my income from my everyday job. Just looking for some advice on what the better play is with that.

 The first and best option is to get a CPA part of your team, they'll know better about your specific situation.

For my agent business here in Ohio, my CPA set me up with an S-Corp, has my pay coming through payroll, and says the additional income I can take as an owner draw. Overall, it will save me about $5-$20k / year in taxes.

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Absolutely. Yes.

When ever you start a business, and you plan on being successful you need protection. Do you need an LLC? Depends on the structure of your company, your goals, and plans, but yes you absolutely do need some sort of protection.

@Bryan Sturman an LLC can be an S-corp, btw, if I remember correctly from how mine is set up. It's not just a taxes thing, it's also a liability thing. Pretty much everyone uses an LLC, however if you are on a shoestring budget, then it's probably okay for the first couple of deals to do as an individual, until it makes sense to spend the money on the LLC formation and yearly tax associated with it. I always tell the young guys who get an LLC without even knowing what they are going to do with it, but love the idea of having an LLC, that "an LLC is just a guarantee that you'll have to pay the state $800 per year" - at least in California, we do. So once you have the LLC, you should have an bank account just for income/expenses associated with that, and you'll be filing an annual tax return for that LLC.

@Bryan Sturman

First - You should consult with an attorney to determine if an entity / asset protection is right for you.

My thoughts - Wholesaling, you normally don't have any employees or property. I would say it is less likely a field that one gets sued compared to other company types.

Best of luck

An LLC is useful to separate your personal wealth from your business risk. In NC (and I suspect other states as well) they are very easy to set up, especially after watching a couple YouTube vids. I think people recommended CPAs and GCs way too often when a tax professional or skilled craftsmen is a better option.

I am sure a CPA would run circles around my tax professional regarding corporate accounting.  I am sure my tax professional can measure up to any CPA regarding rental business structure and accounting.  As a GC, I am licensed to build houses.  My handyman has forgotten more about house construction than I will ever know. 

Recommending a CPA, GC or lawyer for every problem is like recommending IBM in the 70s. An utterly safe and terribly expensive approach. 

No to LLC. LLC entities are for passive income. Wholesaling and flipping are earned income. S Corps are for earned income.

Unless you have a lot of personal assets or really high income, I wouldn’t worry about a pass through entity. Protect yourself with insurance. Wholesaling is low likelihood of being sued and damages would likely be minimal in most situations. As your wealth or business grows or adds an employee, you can always add an entity in the future.

Originally posted by @Bryan Sturman :

I'm not sure if it would be more beneficial to keep all money earned from wholesaling properties separate from my income from my everyday job. 

Keep your finances separate regardless of whether you set up an LLC or not. Get a bank account and card for your wholesaling business. Your accountant will thank you come tax season. An LLC is a tool for liability protection.