Should I be concerned with a LLC ?

[ctrmrz31 0]

I was just wondering about when it was best to apply for an LLC? Will it cost a lot for an LLC? Do I wait until I have a few deals under my belt? Where do I apply when it does come time to get an LLC?

I read all the time that we should never do deals in our own names, but surely it isn't something I should worry about as a newbie, is it?

Anyone with any advice is welcome to give it. Thanks guys and gals!!!

Cruz

[MichaelC 160]

Cruz, good questions with some straightforward answers:

I was just wondering about when it was best to apply for an LLC?

The process of setting up an LLC is literally ten minutes, and can be done online. So, when you do it is up to you. Just know that it is not a difficult process.

Will it cost a lot for an LLC?  Where do I apply when it does come time to get an LLC?

The fee is set by the individual state. I've seen in vary from $20 to $100. Visit your state's Secretary of State website. For the Great State of Texas, you can find it right here. Kick around the site and you should be able to locate all the info you need.

Do I wait until I have a few deals under my belt?

That's your choice. You already know the advantages of having one set up.

I read all the time that we should never do deals in our own names, but surely it isn't something I should worry about as a newbie, is it?

Yes, you should be concerned about doing business correctly from the very beginning.

[mpine 0]

Welcome back!!! How did the REI meeting go?

 

By any chance you know where to find how to make an LLC online for NYS? I have used google and have been unsuccessful, all i have found are sites that charge $364-$600 to get it done.

 

 

Thanks

 

Mike

 

:ph34r:

[MichaelC 160]

Welcome back!!! How did the REI meeting go?

Thanks, Mike. It went well. Lively and friendly crowd. And I love the northeast in October. Tough to beat for a soul soothing experience.

By any chance you know where to find how to make an LLC online for NYS? I have used google and have been unsuccessful, all i have found are sites that charge $364-$600 to get it done.

No need to pay anyone to set up an LLC for you. Go here for information. As is often the case with good ol' NYS, they make things a bit more complicated than necessary. Nevertheless, you can do it yourself and save money. Or, at the very least, shop around if you aren't comfortable with the process. Or ask some fellow members of your club if they can assist you.

[ctrmrz31 0]

So, the smart thing to do right from the start is have an LLC set up to assure myself of some protection. Ok, I got it. Now, if I don't have the cash, that's a different story and we all know that one all to well. So, my decison to have an LLC set up will be postponed until I make my first deal and upon receiving my check I will immediately apply online and hopefully I can avoid trouble until then.

Any stories about someone who started their business without an entity would surely be appreciated.

Thanks fellow Nakedness!

Cruz or Brandon

[Guest Rat_Race_Hater(ImAnEagle)]

Howdy Cruz,

 

Here is a story about a man I learned of from my real estate investing club who didnt use an entity, though he wasnt a L/O investor...but a rehab investor. A fellow investor told the story of what happened because of lack of legal protection.

 

The guy established a small line of credit with a single bank in his community. He would use the borrowed money to buy homes around 65-70% of the actual Fair Market Value and he was able to get good deals because he had the capital and most of the homes needed repairs so I guess he negotiated off those facts. Well this man ended up OWNING and CONTROLING around 1.5 Million dollars worth of real estate and he had NONE of them protected legally. Now you would think once someone has hit that million $ net worth ,they would seriously look into legal protection from necesity. He didnt. Something happened with the bank and, at the time, he had to go to court and he stood to lose every single one of his properties...I believe somehow he got a little behind on a few of his property payments. The bank was pressing to reclaim everything, all, he had. I believe he ended up becoming a motivated seller.

 

Today, we know that each property could have been set up as its own business entity and he would not have lost all his property but just the few that were financially distressed. I know from that true story how important and serious legal protection is now. I agree with MC, though Im no pro, that we should get legally structured as soon as possible.

 

RRH

[ctrmrz31 0]

Hey Rat-Race-hater!

Thanks for the input! I would love to go ahead and set up my LLC, but I just don't have the money right now. So, I will have to make some cash first.

Cruz or Brandon

[bts 0]

each property could have been set up as its own business entity

 

How does that work exactly?

[MichaelC 160]

Each individual property has its own LLC set up for it. For example, say you lease purchase a single family residence at 123 Main Street. You would register the LLC specifically for that property. You could call it 123 Main, LLC. You have signed the agreement under that LLC, of course.

Now, if something should happen and either the owner or the tenant/buyer sue you, your personal assets are protected. The only asset in that LLC is the property itself, which you are renting. So, it isn't even your asset. You have nothing to lose if a judgement is won against you. The LLC provides cheap insurance.

[ctrmrz31 0]

So, your telling me that you have an LLC on both of your companies and then you set up an LLC for each Lease Purchase you do?

Did you start your business with an LLC in the beginning? What did you use on your very first deal? Can I simply do deals in my name? How about I get my company a nice name like you have for yours, set up an LLC for it, could I then just do all my deals through this LLC? Would it be wise to do it this way? Does an LLC expire? Does it have to be renewed every so often?

I am just trying to get myself situated so i can get started right. I haven't secured my first deal yet, but if I made a deal tomorrow would I simply do it in my name since i don't have an LLC set up?

Any insight is appreciated!

Cruz or Brandon

[MichaelC 160]

So, your telling me that you have an LLC on both of your companies and then you set up an LLC for each Lease Purchase you do?

Setting up an LLC on each individual property is not a necessity. I do not do that personally, but I know of some investors who do.

Did you start your business with an LLC in the beginning? What did you use on your very first deal?

No, I didn't. I used my name on my deals when I began. I didn't know any better. Life was simpler in the Jurassic era.

Can I simply do deals in my name?

Yes, you can. It's your decision as to how much exposure you are comfortable with.

How about I get my company a nice name like you have for yours, set up an LLC for it, could I then just do all my deals through this LLC? Would it be wise to do it this way?

That would be an acceptable way to work your deals.

Does an LLC expire? Does it have to be renewed every so often?

They need to be renewed annually. Here in Florida the cost to renew is $50.

I am just trying to get myself situated so i can get started right. I haven't secured my first deal yet, but if I made a deal tomorrow would I simply do it in my name since i don't have an LLC set up?

Any insight is appreciated!

Understood, gents. I don't want to sound like I'm passing the buck here, but you should really speak to someone who is familiar with your specific situation to determine your best course of action. That would be an attorney, a knowledgeable investor from your area, etc.

[bts 0]

Obviously, I am going to consult an attorney before I start an LLC, but i have some more questions.

 

Let's say I have am lease purchasing 2 properties at the same time. Do I have 2 LLC's or do I have 3 LLC's? Do I operate 1 LLC with 2 DBA's? How does this work?

[mpine 0]

just my .02, I would form 1 LLC and use land trusts for each property. Land trusts are free to set up and should provide enough protection. Forming multiple LLCs might cost more then it is worth.

 

Mike

:ph34r:

[-Tony- 0]

well to go back in this thread a little I would like to point something out.

 

Well this man ended up OWNING and CONTROLING around 1.5 Million dollars worth of real estate and he had NONE of them protected legally. Now you would think once someone has hit that million $ net worth ,they would seriously look into legal protection from necesity. He didnt. Something happened with the bank and, at the time, he had to go to court and he stood to lose every single one of his properties...I believe somehow he got a little behind on a few of his property payments. The bank was pressing to reclaim everything, all, he had. I believe he ended up becoming a motivated seller.

 

The point I want to get across is make sure you have built in equity, not just hope appreciation will be XX%. If you buy right you can let property go at a discounted price to get some quick cash and still profit.

 

ctrmrz31,

 

What if you got the property under control set up a t/b and then assigned it to your newly formed LLC. ???

[ctrmrz31 0]

So, in all actuality I would be assigning it to myself right? Or actually my LLC is a whole separate entity, so it wouldn't exactly be myself, but my separate entity which I control right? Sounds like a good idea, I'll look into it, thanks Tony!

Cruz or Brandon