Creating LLC When Wholesaling....
Hi All...
Question came to mind while reading some posts here. Do I need to form a LLC when wholesaling properties to other investors? And if so, should I create a seperate LLC for each property I wholesale to protect myself? I have read this in different places and maybe I have my facts mixed up, so I thought I would ask here to get the nitty gritty !!
Thanks again!!
Chris G
Some people recommend putting each rental or rehab property into seperate LLC's, though other people consider it excessive. That may be what you are thinking of.
In wholesaling, you do not need to do that, since you don't hold the property for long, if at all. The goal is to assign it before you close, or double-close.
What you may want to do is setup a C corp to do your wholesale, if you want a separate entity from yourself to receive the income from the transactions. Check with your accountant, because it depends on your situation.
Good luck
-Peter
Yeah....thats prob. what I was thinking of when I mentioned LLC's.
Thanks for the advice. I will look into them if it is right for me!!
Chris G
Corporations can be used for many different purposes: asset protection, tax strategies and transfer of ownership. For wholesaling since you never take title you are only worried about the tax strategies. You only need a single corporation. Many people are suggesting LLC for short term deals like wholesaling.
Brenda
Or you could set up an LLC, then put each of your properties in a land trust.
Chris,
We sell wholesale properties in Maryland
Every property we put a contract on is held in a seperate LLC.
That makes it easy to assign because you just have to sell the membership rights of the LLC. In Maryland we can fill out the organization papers and create an LLC in one day for $150. No double closing costs. You would have to check your state for fees etc. Good Luck
Thanks everyone for all your www.posts.Each one gave me something to think about. I would have to find out how LLC's work here in Pennsylvania. If anyone has insight on LLC's in PA, let me know by dropping a reply here or PM me.
Thanks again all!!
Chris G
Chris
I use trusts instead of LLC's. Each property has a differnt trust and you can eliminate seasoning issues.
Lori
[addsig]
Lori
Could you please explain how trusts avoid the seasoning issues.
Thanks JohnNH
Sharp:
If you were a really sharp guy, you would
simply "Assign" and never let the property go into your name when you are
"wholesaling" eliminating the need to use an LLC. This is the best way.
If you have to take title, you can use a
corporation or a trust to prevent the
dealer status issue.
Best Riches,
Jeffrey Adam
[addsig]
I prefer to deal wholesales and rehabs through my "C" corp,and hold long-term properties and such as "rentals" , "subject-to's" , "l/o's","notes",and "rent to own" in llc's. [ Edited by MichaelChandler on Date 03/12/2004 ]
Thanks for all the advice. Alot of opinions out there on how to protect ones assets! I understand the reason why you should use a C-corp or LLC , but I truly don't understand the ins and outs of them. Is there a good book or forum here that will help me understand better what these forms of corporation are: pros, cons, tax advantages & disadvantages, and when to use what?
Thanks again for all your replies. They did give a clearer picture as to how everyone uses these tools in their REI biz.
Chris G
Sharp:
Robert Kiyosaki has a new book out on
corporations. You should check it out.
I forget the name.
Remember, assign those wholesale deals when possible!
Best Riches,
Jeffrey Adam
[addsig]
Thanks Jeffery Adams for the advice. I will have to check that one out.
But I have to get one deal under my belt first and then go from there.
Thanks again!!
Chris G
Quote:
On 2004-03-11 21:14, JohnNH wrote:
Lori
Could you please explain how trusts avoid the seasoning issues.
Thanks JohnNH
John,
You have the current owner and yourself on the trust documents. But having you ONLY to have the beneficiary interests and as the trustee. With the sale of the the property, the check would be made to the trustee or the trust depending on the specifis of the deal
Lori
[addsig]
Simply sad, this would not work like described above.
[quote]
On 2004-03-11 17:50, tinman1755 wrote:
Chris
I use trusts instead of LLC's. Each property has a differnt trust and you can eliminate seasoning issues.
Lori
-------------------------------------------------------
Tinman:
This is a great concept. How are you going to eliminate "seasoning" issues
if you are buying a property from HUD?
What capacity is HUD going to serve on the trust you have created?
I understand the concept of having an owner grant deed you their property into a trust to avoid the due on sale clause,
and also the concept involved with having them convey ownership via an
"Amendment To Trust". However,
when you go to sell the property, the title company is going to pick up that it was a
HUD owned property prior. Or even a bank-owned property. They will also see
a new Deed Of Trust on the property with a new loan amount regardless if it is in a trust.
This is a great concept you have, if you could clarify, maybe we could all benefit
by using it in the future to avoid "seasoning" issues.
Best Riches,
Jeffrey Adam
_________________
"The only place success comes before work
is in the dictionary."[ Edited by JeffreyAdam on Date 03/14/2004 ]
Dear Tinman,
You are a mortgage brocker (or working for one).
Jeff have spoken wisely! Can you please explain nicely and slowly how can we avoid seasoning issue through the maneuver in trust? Check your manuals and consult with your multiple lawyers you sad you employ and PLEASE DO share something of true usable value with us newbies. We are hungry for knowledge and hope to learn something from great experts such as yourself.
Creipap