Should I get a DBA?

Question

Hello everyone,

I want to start wholesaling investment deals. Upon the opportunity of me locating a deal. I would offer cash buyers two options. I will sell the contract to them for X amount or become partners in the deal (split the profits 50/50 or whatever we negotiate on). I plan on doing an immense amount of deals within the next 3 years. Should I get a DBA or an LLC for this? If so, why and when? After my first deal, fifth deal, before my first deal? I also have a real estate license. I am not sure if this will change or affect the matter.

Justin Stamper · Answer

@Claudio Trevisan yeah just forget about a DBA for now. Set up an LLC to "purchase" properties under. That is step 1. Step 2, find deals. Step 3, bring them to me. :-0 !

Gerald Demers · Answer

@Claudio Trevisan, you are still confusing DBA usage.  Doing Business As simply states "while I am this entity or person", in the public eye, I am also calling myself this name."

If you start a company, that company has a name.  I told my CPA what I am going to be doing and we decided I should operate under an LLC as an S-Corp.  The first questions he asks is what is the name of your business and who will own it and by what percentage?   No DBA comes into play here.  You need a business name.

Once your company is created, you operate by that name, but if you ever need a different name but the same type of business LLC need, instead of incurring all the expense of creating another company, you can create a DBA.  This way, while you have one business name and one or two or three DBAs, you have just the one LLC to manage, one set of taxes for your CPA to do, one bank account, etc.   We have 5 DBAs for MapleStar Real Estate Investments, LLC including one to shorten our name for credit cards and one called MapleStar Real Estate because it is shorter to write out on offers.   :O)

When you apply to the state for a DBA, it asks you who will own the DBA.  Your LLC will own the DBA.

One other note, when you get a general liability policy for your LLC, make sure they know about your DBAs as well.  If you create a new one, simply call your agent and add it to the list.

Another nice thing about a DBA is that if anyone asks or is concerned, you simply point them to your state website (in Florida, it's www.SunBiz.org) and they can search by the DBA and they will see your company as the owner.  All nice and transparent.

I hope this helps you clear things up,

Gerald Demers

Gerald Demers · Answer

Hello @Claudio Trevisan, I AM NEITHER AN ACCOUNTANT NOR AN ATTORNEY.  You really need to talk to a CPA that understands and focuses supporting real estate investors.

Your question, "should I get a DBA or an LLC for this" does not make sense as I think you are confusing some terms.  The first and most important question is "should I be operating under a company name or personally?" and the answer to that would be a company name.  Now what type of company?  Well, if you are wholesaling, you need a company structure that can take full advantage of these activities.  We have a multi-member LLC with a tax classification of an S-Corp.  In this structure, all real estate is considered inventory so no depreciation and I don't think you can even do long term capital gains.  This is no matter because we are flipping all of our properties through this entity.  With this classification, we can pay salaries, create retirement and medical accounts and do all sorts of fun things to seriously reduce our taxes payable.

We have a second multi-member LLC with a tax classification of a partnership.  Real estate here affords the best real estate deductions: long term capital gains and depreciation to name just two.  We use this LLC to purchase and own our long term rental portfolio.

Should your LLC have a DBA?  If it suits you.  A DBA is just another legal name for your LLC to operate under.  Our LLCs have several DBAs including one that simply shortens our long business name from MapleStar Real Estate Investments, LLC to MapleStar REI LLC so our business name fits on our corporate credit cards.  We also use DBAs to create a different look and feel of our company to our audience.  When you have a DBA owned by your LLC, you just go into your bank and register that DBA with your accounts and someone can write a check to your LLC or your DBA and you never have issues cashing it.

Some people don't have a business and get a DBA owned by themselves PERSONALLY.  Doing this means any liability your create will be attached to your personally and that is NOT good.

So, talk to a CPA that focuses on real estate investing.  If you know other investors, ask them who they use.

Gerald Demers

Claudio Trevisan · Answer

Account Closed I love how you simplified it for me. If you would like to get in touch and meet up in Orlando to discuss Real estate and your property criteria, feel free to DM me for my number.

Claudio Trevisan · Answer

@Gerald Demers Yes this definitely helps. Thank you! I see on your profile that you are an investor in the orlando area and looking for help. What are your goals and what kind of help are you looking for? I am a student at UCF and will be back up in Orlando at the beginning of September.

Gerald Demers · Answer

@Claudio Trevisan, if you use option 2, partnering.  What is the goal of the partnership?  will it be t hold the property long term or will it also be a flip or a fix/flip?

Unless we are absolutely sure the property we are making an offer on is a long term hold, we always make offers with MapleStar Real Estate Investments, LLC, our S-Corp.  If we decide that we want to hold this property, we simply move it over to MapleStar Property Management LLC to own for a long time.

So, what is your plan if you choose to partner?

Gerald Demers

Justin Stamper · Answer

@Claudio Trevisan literally just send me every central florida off market deal you get.

Claudio Trevisan · Answer

@Gerald Demers Thank you for all your advice and wisdom. In regards to your first comment, I should operate under a company name. Do I need a DBA to create a company name? And if so, should I just create and LLC since a DBA itself will not protect me? I will still run all of this by a CPA.

In regards to your second comment, I would take either kind of partnership. Both fit my goals. My long term goal is to own many multifamily and apartment units as rentals. However, I do not have the capital to begin with rentals at the moment. Therefore, my short term goal is to acquire $1million through flips and various sorts of income. So the buy and hold partnership would satisfy my long term goal and the flip would satisfy my short term goal.

Should I get a DBA?

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