All Forum Posts by: Sean Morrison

Disclaimer: I am an attorney, but I am not your attorney. This is not legal advice, just friendly information.

Why is your CPA suggesting an LLC? If it's for liability protection, talk to an attorney, not an accountant. If there's a tax rationale, then listen to what they're saying.

Also, remember that the max on Fannie/Freddie mortgages is 10 per person, so you and your husband could combine to 20 if the properties are kept in one name only. However, getting a mortgage past 4 will cause increased scrutiny.

Disclaimer: I am an attorney, but I am not your attorney. This is not legal advice, just friendly information.

By default, a multi-member LLC is taxed as a partnership, not a corporation. To be taxed as a corporation, the LLC would need to file Form 8832 with the IRS. But it's not common for a real estate investing company to want to be taxed as a corporation.

Disclaimer: I am an attorney, but I am not your attorney. This is not legal advice, just friendly information.

How the LLC works, including voting, selling major assets, who gets paid and how much, is all dealt with in the LLC's operating agreement. If you don't have an operating agreement, then you'll be managed according to the default LLC laws in your state, and it's very likely you don't want to work that way. But by creating an operating agreement, you set it up the way you want to do business. In this case, it's vital that you have a solid operating agreement that makes clear what is expected of the partners and how their investment is protected. Any time there are partners, an attorney needs to be involved.

Disclaimer: I am an attorney, but I am not your attorney. This is not legal advice, just friendly information.

An LLC is a nice way to structure a partnership while also providing some liability protection. If somebody is entering the partnership via the LLC, it should be clear what they are contributing in order to get their shares, whether it be cash or some in-kind service (that choice may also have income tax implications). As a general rule, DIY forms are great until you have a partner. Then it's extremely valuable to have an attorney structure those so the partnership has clearly defined expectations.

Disclaimer: I am an attorney, but I am not your attorney. This is not legal advice, just friendly information.

As a general rule, real estate holding LLCs should be created in the same state as the property. While some states have better protections for LLCs than others, when it comes to real estate courts only want to recognize local protections. As for recognizing series LLCs, we have generally been playing cautious since the courts have not given us much information, and even then it will be state by state. Best practice right now is to register each child LLC as a foreign entity in the state, which kind of defeats the purpose of the series in the first place.

Disclaimer: I am an attorney, but I am not your attorney. This is not legal advice, just friendly information.

A single member LLC is not as big of a deal, but once there is a partner involved, an attorney needs to be as well. Since you're talking about a family investment pool, with multiple members, and a number of child-LLCs, you're getting into some advanced situations.

Disclaimer: I am an attorney, but I am not your attorney. This is not legal advice, just friendly information.

Obviously, I'm biased, but an attorney should put that together. A single member LLC is not as big of a deal, but once there is a partner involved, an attorney needs to be as well.

Disclaimer: I am an attorney, but I am not your attorney. This is not legal advice, just friendly information.

As a general rule, real estate holding LLCs should be created in the same state as the property. While some states have better protections for LLCs than others, when it comes to real estate courts only want to recognize local protections. But an LLC operating in a state, such as by holding property, will need to register in that state either as a local or a foreign LLC. So you'll be paying both states for the privilege.

Disclaimer: I am an attorney, but I am not your attorney. This is not legal advice, just friendly information.

Pro tip - if you're creating LLCs, it's usually best to have separate entities for passive income (rentals) and active income (wholesales, flips). Multiple income streams means different risks and tax implications. If you're being serious about your investments, speak to an attorney.

You don't mention what the LLC is doing. For example, for most people an LLC holding rentals generating passive income is already the best bet. But an LLC providing goods or services may consider an S-Corp status if the owner is earning enough to pay distributions. And even a double-taxed C-Corp can have tax advantages in the right settings.