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First Time Investing With New LLC

far_hunter profile photo
  • Friday, March 18, 2005 @ 02:41 PM EST
  • 13 Comments

Hi - I'm looking for some advice. I am getting ready to close on a property in January (my first investment property) that I will be fixing up and getting back on the market in March.

I've just established an LLC but am buying the property under my name since I started the process on the property before the LLC was completed - only in November.

Is it beneficial for me to transfer the property to the LLC before I put it back on the market? Would there be any tax advantage to doing this because I'd like to start buying properties under the LLC's name starting this year. Im not sure what to do with the profits after this house is sold under my name. I'd like to somehow transfer the profit over to the LLC - to a. Help mature the LLC and b. Avoid Capital Gains tax.

Thanks in advance - I suspect this is an amateur question! grin

Comments(13)

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    kfran12344th January, 2005

    LLC taxation is called pass through taxation. The LLC doesn't actually pay. The taxes pass through the LLC to you. In other words, you claim everything on your personal return. There really isn't any tax advantage to putting the property in the LLC, just the advantage of limited liability.

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    kfran12344th January, 2005

    I'm not sure that forming an LLC will afffect how your profit is categorized. When I sell a rehab, whether the profit is considered income or capital gains has to do with how long before I sell. If I buy a property, rehab it and sell within a year, it is taxed as income. If I hold it for at least a year, then it is capital gains. The only advantage of an LLC and the reason I formed one was for the limited liability.

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    coshore4th January, 2005

    for taxation purposes you can also look into filing your LLC as an S type corporation, they have lower tax rates, but in order to pay yourself you might get taxed again as salary depending on how you play it. but i believe money re-invested is not taxed. i suggest buying a book, there are a lot of good ones that cover it

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    far_hunter4th January, 2005

    Thanks so much for the advice!

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    tcbdlb10th January, 2005

    Do you think you will have trouble obtaining financing due to lack of credit history with your llc? I am too, struggling with this. Should I leave it as sole proprietorship or convert to llc? If I do convert to LLC will this adversely affect my ability to obtain credit....

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    far_hunter11th January, 2005

    I believe,...and then again I am only beginning here too,....that a business must develop credit the same way individuals do.

    For my LLC I plan on investing some capital into it before I try to work with any credit capabilities it may have. I know that an LLC makes or breaks is reflected directly back to the member(s) which may by a reason for me to reflect upon exactly which business entity I really need to do long-term REI,...but that's another topic question grin

    I have read in the Rich Dad Poor Dad series that Sole proprietorships are not the safest entity to have - but that is the limit of my research.

    Let's see what the other folks have to say - thanks for the message

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    jboehmer15th January, 2005

    I have worked with hundreds of clients that LLC each one of their investment properties. The purpose for doing this is the limited liability protection for you the owner. In this arrangement it is more difficult for a claimant to access your other properties as they reside in their own LLC.

    That said, I have my own question. I recently purchased a single family home that I am currently renting. I am bringing in a business partner to purchase 50% of the property, but I want this transaction to occur inside the an LLC. Currently the property is owned in my personal name and I would like to move it into an LLC. Will I need the LLC to purchase the property from me? Will I be required to pay transfer taxes? Can I simply convey the property to the LLC?

    Thank you in advance! :-D

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    intlit17th January, 2005

    Hi - I'm new to REI but after reading the posts on the forum, I am much more motivated after hearing all the great support.

    My first question is about forming an LLC. What type of LLC should I form? Contruction? Services? Any input will be greatly appreciated.

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    far_hunter21st January, 2005

    I think you might be better off posting your question under a new topic,....this one hasnt really sprouted grin and others might not see your question.

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    missty102918th March, 2005

    Thi is my first post but hopefully helpful.

    I actually have an LLC and you have the option of having it taxed as an S-corp without the restrictions of being an S-corp. Follow up at www.IRS.gov because there would be paperwork to fill out.

    As for setting up an LLC for each property, is that expensive and a lot of paperwork? Could you just have an LLC and then each propery be a subsidiary of the LLC?

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    funlove1418th March, 2005

    Jeff -

    Thank you for your response. You make very valid suggestions and the timeline is very helpful. I will continue to read and seek out the professionals as necessary.
    [addsig]

  • JohnLocke
    JohnLocke17th March, 2005

    la2lawoman,

    This person sounds to me like she was hustlng for loans, using the pretense that she wanted to purchase houses. Mis print my you know what.

    There is a big difference in what a Bird Dog does and a real estate agent does, not everyone in the world uses realtors so why should you feel guilty? What about those folks who do not use realtors, you are supplying a service to them. So there is no comparison, apples and oranges.

    John $Cash$ Locke
    [addsig]

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    iamhappy17th March, 2005

    Why feel guilty about wanting to make money for yourself? Anyone can do it without going out and getting a license, she can too.

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