Originally posted by Bill Mitchell:
Originally posted by Terry Portier:
You should stop and read alot about LLCs before asking this question, tax benefits are the last reason you need an LLC. You need to state whether you are SP or a have partner before this question can even be answered accurately. Once you study them you will see they provide asset protection regardless of if you whole sale, flip, renovate if managed properly and understood.
The entity would just myself and my wife. And you are 100% correct I have much more reading to do, I wasn't trying to insinuate I was about to set up a LLC right this moment. In the near future, I was just looking for general guidance here.
There is a recent blog by Ali on LLCs that got a lot of responses, how they relate to contracts, insurance, etc, you might want check out. I did a ton of research before I made a decision to the point I at least knew what questions to ask. If you go to your states dept of revenue, mine list some great resources to get help like fed Small Business Admin (SBA) , and your state may have one. There is good legal advice out there for free. I got into a lot of good discussions on BP, there are professionals out here that know what they are talking about, just as many that don’t, and ones with experience. Some, not all, things vary by state. There was a TX attorney that chimed in on Alis thread about how he set up series LLC, how TX considers them separate entities. My state also has approved them and treats them the same way, so I went and read the statue on my states legislative website, easy to set up, but they are hard to insure here, which I feel strongly is part of setting up an LLC, to fully understand and insure it with a Commercial Liability Policy. The other big one to find out is if you state allows foreclosure on a member’s interest, not all do, and check out some case laws in your state to consider too. LLCs are a relatively new entity, as related to RE, contracts, probate, can get quite complex. Here is a good article, http://www.johntreed.com/entity.html. Attorney’s, courts, are still interpreting statues by case law, you can look at some of these on the internet.
Some states like Delaware, Wyoming, Nevada, are corporate tax haven with a long history of case laws that people flock to as foreign entities. Some states still require you to register in the state you conduct business in and maintain a residence or registered agent.
After a year in operation with a high exposure level to personal injury I am still learning. Recently I discovered that the wording on my contract did not allow collect up to 40% attorney fees, also that I need to sign my contracts with my corporate title. Knowing how to structure your contracts would be an area to seek an attorney that has experience in court with your business model.
I set mine up on my own, that part is easy, and there is nothing to challenge there in court other than not staying active. When I filed I get my Articles of Organization, if I am SP with no employees I don’t have to register with the dept of rev for taxes it happens when I file. If I am a general partnership like you I do because my states wants to know the type of corporate business I will be conducting, if I will have employee withholdings, sales tax, liquor, tobacco, etc . So it is a little more involved, this can take up to several weeks and you cannot conduct business until you are a registered business with a certificate of registration in hand. That is why I asked if you were SP.
A general partnership has better legal protection because more members have an interest, you can sell interest, S or C has public stock/shares an LLC does not. I like LLCs since I am able to structure them as I wish, where an S or C has stricter structure legally. I also like the tax flexibility of the sub chapters, SP, S, or C I can elect. I am in the process of writing my own Operating Agreement since we are a family LLC too, so I do not have a stranger as a partner, if I did I go to an attorney. The Operating agreement here does not get filled with my Secretary of State and stays in my file.
Sorry about the book hope it helps, I been revisiting my LLC with respect to expanding divisionally and with employees , a possible series LLC, my contracts, probate, retirement, etc, they do require attention and continuous maintenance, can get complex. I may be approaching a point soon where I may be over my head needing an attorney.
Good luck!