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Updated about 13 years ago on . Most recent reply presented by

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Joe Smith
  • Akron, OH
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strucuring entities

Joe Smith
  • Akron, OH
Posted

OK - I have an idea here and want some feedback.

Say my wife and I create a "parent" company, or holding company, a 2-member, 50/50 LLC. Let's call it "Joe's Rentals, LLC" for the sake of this post.

Now, say I buy an apartment building or complex called "ABC Apartments" and the seller/current owner of record is "ABC Apartments, LLC".

Since the apartment has a "name" that is known in the community, can I:

1. Buy the apartment under Joe's Rentals, LLC, but still allow it to be called "ABC Apartments"? Would I have to set up a "DBA" in order to do this??

2. Literally BUY the LLC as well as the apartment complex itself, i.e., I'll buy the complex, but also, the LLC under which it is held? Then, organize that LLC as being owned by my existing LLC? If this were an option, how would it be structured loan-wise? Would the bank/lender still call it a CRE loan, or, would they look at it as if I were getting a loan to acquire the actual "business" entity and all its "contents" (this case likely just the building and perhaps some office and maintenance equipment that goes with it)

3. Create a new LLC that is a single member LLC, with the "member" being Joe's Rental's LLC, and call it something like "ABC Apartments of Akron, LLC", being a slightly different, but recognizeable name for the apartment I am acquiring.

Sorry if these are stupid questions, I've only dealt with small stuff up until this point.

Thanks

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Bill Gulley#3 Guru, Book, & Course Reviews Contributor
  • Investor, Entrepreneur, Educator
  • Springfield, MO
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Bill Gulley#3 Guru, Book, & Course Reviews Contributor
  • Investor, Entrepreneur, Educator
  • Springfield, MO
Replied

I have had multiple LLCs with a holding company and yes that is a good strategy. Naming a building will not need a DBA unless you are contracting or doing business in that name. For example The Apple Tree appartments could simply be a location name or you can have ATA LLC and contract leases in that name.

Don't worry about how a lender will want to collateralize your commercial loans, they will want to take as much as they can and it depends on the property as well as how you structure your entities.

You should put your ideas of you empire down on paper and consider how the companies will interact, what purpose they serve and why! Then see an attorney and your tax advisor before you file to create your entities so that they mesh and interact as needed.

IMO, one thing that attorneys and tax types often fail to do is to look far enough in the future as to what you might do or could do and plan for other activities. They usually only address current operations contemplated and the attorney (and Sec. of State) will use verbage as...and to do all other things allowed and necessary by law....but that's not really much of a business plan. So, think ahead...will you want a maintenance company, a construction company, rental management, do seller financing/sell notes/service contracts?????? Just some thoughts...

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