All Forum Posts by: Terry Portier

I got a good chuckle out of this, thx. I've been reading BP LLC post for about a year now. One subject I don't think will ever stop debating by people that have never been in court with one, including attorneys. If you want some real answers go out and read case laws in YOUR state, and statues. Then you'll be educated enough to know that you'll still be hard pressed to find two attorney's that agree more less two BP's. But understanding the basics like the difference between legal structure and insurance many don't, single vs muliti, contracts, how in most actual cases the veil was pierced, etc….

Here is my favorite answer by Reed there really is none, http://www.johntreed.com/entity.html

I think there are so many variables and laws still being challenged by case law it makes it difficult to determine how valid the LLC vs SP asset protection really is. I decided on an insured LLC since as a construction company and REI my exposure and risk are high, well higher than a landlord. I'm still trying to figure out after a year if it is worth it for rentals since for centuries we did without them, and many successful old schools still do, not that it makes it right, but you have more case law and history there.

One way to stop all debates and BS on the subject is to ask for a recent case that proves someone’s theory as I did @bottom of the thread you referenced in your last post ;)

I’m no judge or jury but if you have to personally back an entity loan because it will not qualify that is not acting as a sole proprietor nor co-mingling funds. If you have a DOS in an existing mortgage and QCD to an entity that is fraud and can be looked at as acting as a SP and co-mingling. Home equity to get around qualifying an LLC, legit. I look at it like if I were in a court room and a prosecuting attorney were trying to pierce my LLC by proving I acted knowingly or unknowingly as an SP how can I prove otherwise. If for the most part I keep my books, contracts, bank accounts, insurance, financing to the best of ability the evidence stacks up on my LLCs side.

Another asset not mentioned is having to put out attorney fees, an insured LLC entity is very difficult, especially multi-members, most will back off unless they see a slam dunk fraud case.

I believe series LLCs are legal in TX so we need more clarity or is there going to be 3 separate LLCs? Also does the price include obtaining the Articles of Organization and/or Operating Agreement? A lot of hours can go into setting up a OA with respect to a trust, planning, probate, members interest, contracts, etc where an attorney is needed that has some experience in court with that LLC structure. A lot of what I would pay one for would be based on asset protection based on LLC cases they won. Me personally, would want to read the case, then I decide what I thought the attorney was worth. LLCs are fairly new so you have to be careful here with attorneys that have great ideas, charge for them, but have never been in court with them. Great thing about LLCs is they are flexable with less rules than other legal structures, that may or not be a good thing in court and choosing the right attorney.

@J Scott

We manage around 25 open accounts, residential and commercial, a day and I’d guess at the end of the year we will have closed around 1500 revolving accounts. We hope to double that next year.

Tracking material and labor cost per day per job is a challenge, especially when a lot of your own money is out there and you have not been paid. Right now our production managers bring receipts to our admin with job #s and we assign and track cost that way to a home, etc….

Some accounts we get paid in a matter of days, larger jobs weeks. I wish there were a way to swipe a card and assign a job# to it so our admin could go online, see the cost, and not have to wait for paper receipts. Other problems with paper receipts is it can be difficult to return materials when the production manager turned them in, and/or could lose them. We do reconcile our accounts to bank statements too.

So I been talking to banks about setting up separate debit cards for my PMs, I would be able to filter one of them out online, but would not be able to tell what job # the charge is for. Our PMs can purchase materials for 5-10-15 jobs per day.

I know we may be getting a little off topic here, but it is something to consider as part of the time setting up an LLC. I'm sure the big companies have enough equity built to buy them time to balance their books, but it can be a challenge if you are start-up without a lot of equity. As you grow the need for equity also increases making it more challenging. Every job we do we put a percentage in the LLC as an equity asset, some goes to feeding new business, some to growing.

@Steven J.

With LLCs being as new as they are I doubt you find much practical info on them in get rich text books. Don't feel along in not understanding them, many statues are still being interpreted by case law and I bet you be hard pressed to find a LLC with Real Estate structure, more so a Series LLC as denoted on this thread that has been in a court of law. Everything else is just opinion, including attorney's. I'd suggest continuing to learn all you can by reading statues in your state and watching case law. It really is not rocket science, go read your states LLCs statues that will give you the ability to at least know what questions to ask an attorney that has actual experience in court with what they propose as legal.

Bill,

What is LIFO or FIFO? I need to add these to my list of BP acronyms I been struggling to figure out since I joined. :)

We run into the issue often where we have a lot of money out in investments that we have not been paid for making it hard to determine where you’re at. The accrual method is more accurate from a income/dept standpoint from what I understand, but can be misleading since income ledger may show thousands of dollars in sales, while in reality your bank account is empty because your customers haven't paid you yet.

Cash method provides a more accurate picture of how much actual cash your business has, it may offer a misleading picture of longer-term profitability. For instance, your books may show one month to be spectacularly profitable, when actually sales have been slow and, by coincidence, a lot of credit customers paid their bills in that month.

Reason I bring this up is you'll probably be asked to choose a method when you register your LLC and in order to change it you have to write the IRS and wait for approval. I can change my tax year by writing the IRS.

Other thing is bank accounts: The banks will want your Articles of Organization and Operating Agreement. The OA also acts as the Pay on Death (POD). If you are single member LLC I believe you can set up a POD, not multimember.

Steve,

"I will advise that it is typically an extremely bad idea to hold real estate in a C-corporation long term"

Why?

What about accounting methods, is cash better than accrual if you tend to close your contract sales, income and expenses all in the same calender year?

Well here is what a TX attorney said he does on Ali threads. Looks interesting, cuts registration fees of having separate LLC's. My state is $160 then $100 for each series, and has the same legal structure. I asked if had ever been in court with such a structure and got no answer. My agent says they are hard to insure, but I want to get some quotes. In Delaware, or better yet Nevada, a series could be a C or S corp for tax benefits. I read over half of the fortune 500 companies are registered in these states. I'm sure if you know what you are doing, LLCs have better tax and legal breaks there. Might be time to take a flight to Vegas to find that attorney, or loose some cashola gambling lol!

A typical series LLC structure for many of my real estate investor clients looks like this (I’ll use my last name in the example):

Master LLC = Clark Holdings, LLC, a Texas series limited liability company.

First series = Clark Property Management, LLC, an individual series of Clark Holdings, LLC, a Texas series limited liability company.

Second series = 123 Main Street, LLC, an individual series of Clark Holdings, LLC, a Texas series limited liability company.

Third series = 456 Main Street, LLC, an individual series of Clark Holdings, LLC, a Texas series limited liability company.

I run my property management through the first series. The second and third series each hold their respective property and the respective debt.

If, subsequently to setting up my series LLC, I buy another property, I simply add a fourth series (i.e., 789 Main Street, LLC, an individual series of Clark Holdings, LLC, a Texas limited liability company). If I subsequently sell the asset in the first series, I then can dissolve that individual series.

I hope this gives you and your readers some valuable insight in to the structure of a series LLC.

What about accounting methods, is cash better than accrual if you tend to close your contract sales, income and expenses all in calender year?

Yeah I was just reading about that, now Nevada is trying to out do them, and Wyoming. Man they sound way better than my state, no state income or self employment tax and you can shift profit and losses in your OP for tax bene's. In looking at my states registration form, I see a "corporate income tax" "all" have to pay if they make income here, 4% of taxable income and a surtax of 3% taxable income above above $50 gees.

No juries, hard for judgements to get in and manage distributions to pay one, sounds like a place for cash investors low risk.

I'm calling my state Monday look into this more.

@Steven Hamilton II our resident tax expert. What do you know about the tax benes to registering in a state like Delaware? Word is it's a 'tax haven'...would that be more for corporate tax avoidance like for C's?