Formal Business Set-up - When?

Question

I am new to real estate investing and am currently interested in real estate wholesaling. I am in Texas, in the greater Houston market.

My question is do I need to create a formal Business entity before starting to make wholesale deals? I know from an accounting / tax perspective this would make things cleaner but I want to get started in finding / making deals. Is this something I can do later or something that I even need to do at all?

Todd Lennig · Answer

@Brian Nally is right on about comingling.  If you don't want to set up the business then you can at least get another checking account an only use for business.  That will help a lot.  Accounting software doesn't care weather its a business account or personal.

As for setting up a business, I just had a bookkeeping client use https://www.incfile.com and was very happy.  They charge close to nothing and sometimes nothing and do a lot of work for you.  Obviously everyone is different so make sure that they have what you need.  They won't tell you what business entity is the best for you.  @Guy Gimenez is correct, hire a lawyer to help you with that.

Glenn Jackson · Answer

@Brian Nally and @Guy Gimenez thank you.

Brian Nally · Answer

I had one set up from the start.  It's only a few hundred dollars to file with the SOS in Texas and once you do this you can open a bank account in the business's name.  I like having separate accounts for my different businesses to keep the accounting simpler and to ensure that I'm not commingling funds.

Guy Gimenez · Answer

If you don't have substantial assets, and your sole intention is to assign your contracts, IMO, you don't need an entity. Just get help drafting the contract to limit your liability. Don't step over a dollar to save a dime. Get good legal counsel and be diligent about learning contracts, assignments, valuation, repair costs, etc.

Formal Business Set-up - When?

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