How Important Is Getting Incorporated ?
Hi Everybody:
I have 4 properties for REI
and one free and clear home in which we
live in. So far we are doing it all in our
personal names. At what stage is it
important to get INCORPORATED?
sayana 
I have 40 SFH and they are ALL in my name...I L/O all my homes...that is my choice....but they all have an umbrella for 1M+...
I have never been sued and I hope I never will be...
I have sued others and WON 99.9% of them...I WAS THE FOOL...my(OWN)lawyer
I HATE GETTING A LAWYER INVOLVED...
...as always,
GoodInvesting, Rocky
It does cost about $600 to incorporate with an LLC and then $50 per year.
One lawsuit and you could potentially loose everything you own (including your home, car, boat, furniture, etc)
Also with everything owned in your own name, you're a target for litigation. Anyone can do a search at the county office and see what you own.
Land trusts can help that issue, but it doesn't help the liability issue.
You could live 100 years and never get sued....but it only takes one.
In our society, I think it's crazy to own half a million dollars worth of property and not spend $600 to protect it. Look at it as insurance.
I have the same question...when to incorporate? Also...
Is it best to place all properties in 1 LLC, or an LLC for each property? Does it matter what state the LLC is formed in? Does it matter what state the properties are in vs the state the LLC is incorporated in?
Would appreciate any help from the great people I have just begun to meet at TCI...you all are awesome!!
Hi hibby76:
Is $ 600 the Attorney fee?
Could anyone explain the steps necessary
to go thru the LLC PROCESS. Can we
incorporate ONLINE?
sayana
HI SAYANA,
In response to your question... I will have to agree with Hibby 76 ... You should consider buying and selling under a Land Trusts ...because of the benefits it will bring ..especially when trying to transfer and reassign titles much more inexpensive... Wishing you well with your decision.....
Yours in Solidarity,
VETDEV69
Hi VETDEV69:
Thanks a lot. Would you mind
explaining the formation of LAND TRUST ?
sayana
I agree with hibby76 - I would say it's very important.
In the state of Ohio, you can get an application on-line and mail it in with the application fee - you don't have to have a lawyer to get an LLC. (www.state.oh.us/sos)
Lisa
Here is the problem. Even an LLC won't give you unlimited protection against lawsuits. At best it will protect your personal assets but not all the properties tha you have so carefully built up. And as Dave pointed out it is easy to do an assett search which generally shows what you own personally and what corps/llc's you are partner/owner in. Also available to be sued.
Most insurance (I carry 1million umbrella) is not real good at protecting you and does not protect you against "punitive" damages (and that is where the really big $ comes in from a lawsuit).
with a good attorney and CPA or help from an asset protection agency you can use two corps/LLC's (C corp provides more protection and benefits) one of them being a Nevada Corporation with "nominee" director and shareholders. This will keep your name off everything that is reported to the state and IRS and is incredibly hard to pierce in an asset search.
Another benefit is that you don't pay state corporate taxes in Nevada and Wyoming. Which means that on income you would pay 15% federal taxes only. This amounts to quite a savings, in Utah it is a 5% tax and in Oregon 6.5%
If you want to just do the run of the mill thing then for a couple of hundred dollars and a visit to a stationary store if needed) you can look for the secretary of state in your state on the net and look up the links for business registration.
I have stumbled across this website which covers most of this if you are interested I shall post it here.
http://www.assetprofile.com/twocorporationstrategy.html
Click on the flash demo at the top of the page and it will walk you through the benefits of this type of scenario. I also have several books on asset protection and they are available at the bookstore and on ebay.
If you have substantial assets I think that this is worthwhile protecting. It doesn't take much to lose your ...ets
Even with a two corporate structure, a judge or attorney can make you raise your right hand in court and ask you what other assets you own.
With a Nevada corporation using bearer shares, you can legally bypass this challenge. If they cannot find your assets, they cannot seize them.
I just went to the ****Must Reach Senior Investor status before posting URL's***v website and looked up land trusts.
So I went to the ****Must Reach Senior Investor status before posting URL's***v website and found this definition, in a document that had an ominous title - look here:****Must Reach Senior Investor status before posting URL's***,,id=106553,00.html
Here's the reference to land trusts - it is at the end of the URL page I just cited:
~~~~
Illinois Land Trust
In Illinois, and in five other states, legislation has been enacted that creates a special type of trust, commonly referred to as an "Illinois Land Trust". These trusts are designed to house real estate within a grantor trust and provide limited access to grantor or beneficiary information contained in the trust instrument or known to the trustee. Once a land trust is established, the ability to trace property transactions becomes limited as state law establishes the right of the trustee not to disclose the true owner of the property or those with a beneficial interest. The "land trust" has no special distinction in the Internal Revenue Code and would be a simple, complex, or grantor trust depending on the terms of the trust instrument. Filing requirements would depend on the type of trust.
~~~~
So - which states allow land trust, and which states consider them a tax evasion strategy?
I will call the IRS at 1-800-829-1040 to find out asap. if anyone else cares to do the same, maybe we could compare notes?
Marlene
Incorporation - great question.
I live in California and my CA attorney gave me a slew of reasons to go with a CA S corp - to avoid double taxation and to be sole owner of the property - stuff like that. (I forget all the details.)
I don't know if he hosed me or what, after I've read some of the info on this site. It looks like folks here like the LLC better.
Q. 1. Are LLC's better than S Corps for holding title to investment properties?
If so, why?
Q.2. And regarding the state thing...I have a corp in Nevada for another purpose for over 5 years now, and it's been a snap to administer, but it didn't occur to me to get a Nevada corp to hold title of a CA property. Is this really legitimate??
Thank you for your time and effort.
Marlene
Whoops! Looks like I can't post URls here yet. Ok, I understand, so I'll just call it by its name and not give the link.
The site I was referencing was the IRS website. The one and only.
Becoming a corp or LLC is really not that simple. Besides the intitial setup fees, it takes money to keep either up and running. You also have to make sure that your paperwork is kept current and up-to-date or all that 'protection' will quickly go down the drain.
Also, A corp/LLC may or may not save on taxes. In fact, if you're fewer than 5 or so deals a year, or are making less than $100K gross profit, being a business entity will probably cost you money in taxes.
Finally, until you know this is a business that you actually want to be in (have a few deals under your belt and liked the experience), why would want to spend the money to form a business entity, much less 2 (from hibby's post). People use the scare tactic of 'losing everything you own' in a lawsuit. While it could happen, it's not really that common, and simply having a corp/LLC is not a guarantee that it won't be taken away anyway. You're best idea in this matter is to do things correctly and morally in the first place. This is the proper way to prevent getting sued.
Roger
I thought that LLC has all of the bennefits of a corporation.
Reading the above posts I got a question:
Suppose you own a couple of houses through the Subject to strategy with the existing financing staying alive, and somebody for whatever reason wants to sue you, and they find the respective deeds recorded in your name. Would you loose those properties if you lost? What would happen to the buyers of those properties who will refinance in 2 years?
This is just a hypothetical question, but important enough to have an answer.
Ladybug
Ladybug,
Good question. That is what is great about this forum. You never know where a question will take you.
Thanks
Housebyr
When deciding to incorporate there are a few factors to keep in mind. First is that Corporation or LLC may not protect you from liability at all unless you are very careful. LLCs & Corporations are seperate entiites from yourself, almost like another person, and have to be maintained properly to be effective. Corporations are the more difficult of the two, as there is much more paperwork to keep up with, including minutes that authorize almost every transaction you make, and yearly meetings. And you also have to make sure that you never mix your personal transactions with your business transactions. If you do, a lawyer can do what's called "piercing the corporate veil", and basically say your corporation is a sham and you will be subject to unlimited liability. An LLC does not require all the paper work and corporate formalities, which is why it is preferred by many investors. But you still have to be very careful to keep your personal and business transactions seperate. And there is a feeling in the legal community that LLCs, being a relatively new business entity, are not as "court tested" in protecting assets as corporations, but how true this is I can't say. Hope that helps.
If I live in NJ and plan on doing business in NJ, can I form a Nv LLC and continue to do business here? Or would I have to register as a foreign(did I spell right) entity?
It is probably different from state to state and person to person. We own our own businesses (real estate brokers, developers and contractors). We have been advised by our attorney and by our CPA. We are incorporated, LLC'd, Umbrella'd ($1M) and Insured very highly. I guess overkill is ok when you are talking a great amount of money and assets to loose because you might tee someone off accidently.
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