Ask these questions before paying a service to form LLC's for you

[Stuart Udis]

These types of ads are becoming more and more prevalent and I cringe each time I see them. I believe novice investors who are looking to invest out of state are the target in many instances. Remember 99% of claims that will arise as a real estate owner will be landlord/tenant, premises liability or a payment/performance dispute. I am an advocate for owning investment real estate in an LLC but keep it simple. Before anyone tries to convince you to form an LLC in a state other than the state where the property is located or where you live, ask them to explain the fact pattern where the NV, WY or DE LLC will actually become relevant. I use these states because they are often pushed online. Selling impractical entities is becoming big business. Using this very add as an example:

1. Relevance of no state income tax if the proprty is located in a different state? You will be paying state income taxes in the state where property is located.

2. Good luck getting a loan or even a title commitment without an operating agreement

3. Under what circumstance will NV be the proper venue and choice of law for a dispute involving a property located in a state other than NV? Are you going to resolve your landlord/tenant dispute there? If someone slips and falls outside of your property will the lawsuit be filed in NV? If you stiff you contractor are they going to file their mechanics lien in NV?  Even if you aren't at fault and the GC fails to pay the sub contractor? I don't think so...

[Chris Seveney]

Quote from @Stuart Udis:

These types of ads are becoming more and more prevalent and I cringe each time I see them. I believe novice investors who are looking to invest out of state are the target in many instances. Remember 99% of claims that will arise as a real estate owner will be landlord/tenant, premises liability or a payment/performance dispute. I am an advocate for owning investment real estate in an LLC but keep it simple. Before anyone tries to convince you to form an LLC in a state other than the state where the property is located or where you live, ask them to explain the fact pattern where the NV, WY or DE LLC will actually become relevant. I use these states because they are often pushed online. Selling impractical entities is becoming big business. Using this very add as an example:

1. Relevance of no state income tax if the proprty is located in a different state? You will be paying state income taxes in the state where property is located.

2. Good luck getting a loan or even a title commitment without an operating agreement

3. Under what circumstance will NV be the proper venue and choice of law for a dispute involving a property located in a state other than NV? Are you going to resolve your landlord/tenant dispute there? If someone slips and falls outside of your property will the lawsuit be filed in NV? If you stiff you contractor are they going to file their mechanics lien in NV?  Even if you aren't at fault and the GC fails to pay the sub contractor? I don't think so...

Besides that, the cost they charge people for this to me is absurd. Almost every state has step by step instructions and an online form to complete that takes less than 15 minutes to create a LLC and similar for a EIN. Yes you should get an attorney to draft an operating agreement for you but that should not be more than $250 as they are pretty off the shelf items. When I see people paying $5-$10k for some platinum asset protection I scratch my head.