How Do I Start Up An LLC
I currently have 5 rentals and want to do a LLC. But I am honestly clueless on what to do. Do I need a seperate one for each unit (property since one is a duplex) or can I do one that encopasses all of them....One of the 5 is a second home on my primary residence will this complicate things.....the last 2 were inherited and are all but free and clear........Anyone local (50 miles) know of any real good real estate attorneys that could help out if it is needed? I appreciate all and any help.......
Brian
First, I'd suggesting talking to an accountant. They can steer you with regards to setting things up with tax benefits in mind. Talk to an attorney, and discuss with them the propert way to set things up with regards to asset protection, and limiting your personal liability. You'll probably end up sitting up somewhere in between. When you do this, either of the above can do it for you, or you can get the forms from most office supply houses, or online at http://www.alphapublications.com, for around $25 or $30. The following site, http://www.inccheap.com will do it for you for $79.00
Good Luck,
Jeff[ Edited by jeff12002 on Date 12/26/2003 ]
Your state corporation commission will have the forms, most likely, for free.
Once you decide an LLC is the way to go, forming an LLC is easy. Fill out some forms available from the state, pay the fee to the state, publish/announce LLC in an economical local paper. You have an LLC...
Go to: http://www.alltheweb.com ( a search engine I find to have some adventages in comperason with google) and tipe-in "LLC". You'll get a lots of sites. Dedicate 1 hour for 5 potential candidates that wil form your LLC, call them, discuse the questions you have witht them and upon expiration of that 1-2 hours sesion, you'll have your LLP.
[addsig]
BMan:
Yes the LLC is the way to go as opposed to the LLP; and yes you will want to form an LLC for each deal that you put together. I just recently learned this in my RE finance and investment class.[ Edited by starmand on Date 12/26/2003 ]
starmand,
Could you explain why you should form a separate LLC for each property? I've never really understood this. What are the advantages of doing it this way, and what are the potential consequences of not forming a separate LLC for each property?
Thanks,
Jeff
Hey Jeff,
I believe it is more for asset protection than anything. Basically if you have all your properties in 1 LLC and your LLC gets sued you are risking all of your properties, as opposed to just one property if each are set up in their own LLC. I imagine there would be some tax benefits as well, not sure though. I can't remember exactly where I heard this, but I am pretty sure this is the concept.
That may be, but with publication, and meeting requirements. separate bank accounts etc. to keep your LLC recognized as a legitimate business, (Necesary to keep the courts from ignoring the LLC structure, and going after you personally) this would seem to be a fairly tedious task for each property.
Why not establish an LLC to hold your assets that is manager managed, and set up a second LLC that does not have any assets, strictly for the purpose of managing LLC #1. The members of LLC #1 are not liable, and LLC #2 is the liable party, but it has no assets. [ Edited by jeff12002 on Date 12/26/2003 ]
Hello Jeff,
I agree with you that is would be a pain. Perhaps your idea would work well too. I leave all these details up to my accountant as he is retired from the IRS. I haven't really talked to him about this issue as I have no rentals but it will be interesting to hear his comments when the time comes. I believe the seperate LLC's were suggested at a REIA meeting I attended a couple years back. Just thought I'd add my 2cents in for what it was worth
www.thecompanycorporation.com seems a little pricier than a few mentioned, but the are pretty turn-key when it comes to setting up the entities I have done.
I usually do a LLC for every three properties or so. It really depends on the property and the comfort level I have with the area that it is located.
Asset protection is a good thing.
The advantage of an LLC holding your properties is asset protection. You will need to determine what level of protection you want.
If all of your properties are held in 1 LLC, then your assett protection is minimal. Your personal residence is protected against suits brought against the LLC, and all of your income producing properties are vulnerable.
If you hold each property in an individual LLC, then each property is protected from the liabilities of the others.
Obviously there are a dozen combinations, you can hold 2, 3, or 4 properties in each LLC, risking 2, 3, or 4 properties at a time, but saving some of the paperwork associated with having multiple LLC's.
I believe the tax advantages with multiple LLC's are the same as they are for a single LLC.
You will need to personally assess your own risk tolerance, and set up your LLC's accordingly.