Questions about using LLC for flips...

[Brandon Stiles]

I know I need to sit down and talk to an accountant before moving forward but I was hoping someone could help clarify a few things for me.

I'm planning on creating an LLC for house flipping. Mainly so I can elect to be taxed as an s corp and reduce some of my SE taxes. I'm going to take out a heloc on my primary to fund the DP and rehab, then ideally pay it back once I sell the home, rinse and repeat.

Can I take out a heloc on my primary under my LLC?

If I take out the heloc in my personal name but use it towards business operations how do I do this on paper? The heloc acc and home purchase would be on my personal credit and not my business credit correct?

To my understanding, if I transfer the home to my LLC I'm not actually transfering ownership so would it still be considered a personal asset vs inventory for my business?

From what I've read it can be difficult to purchase directly under an LLC so most people transfer but I'm not really understanding how it works in regards to accounting.

I want to keep my personal accounts and business seperate but I'm struggling to understand the process in this scenario.

[Luis Alvarez]

@Brandon Stiles I'm going to preface this with saying that I have a legal background in estate planning and asset protection, and before law school I majored in Economics/Business Strategy.  However, this is not specific legal advice, just my opinion.

The overall theme of what others mentioned is about right, the main thing it seems you are concerned with is how this all plays out as you fund the LLC from the HELOC, go through the repair process, sell, and rinse/repeat. Acquiring the property in one's personal name and then transferring to an LLC (as long as it's done correctly) typically would not trigger a due on sale clause (this is one of the biggest incorrect beliefs on BP and the internet in general). I can always elaborate if specifics are needed. When you mentioned "To my understanding, if I transfer the home to my LLC I'm not actually transferring ownership so would it still be considered a personal asset vs inventory for my business?" that is incorrect.  Transferring title to an LLC does actually transfer ownership to the LLC.

I'm not a CPA, and this is not tax advice, but it may be prudent to have an LLC (taxed as an S-Corp) to help with the active income and have an LLC (treated as a disregarded entity for tax purposes) be the one that holds title to the properties. So you have some operational distance.

Keeping separate bank accounts is not only paramount, but it makes things cleaner and allows you to scale easier later on.