Legal Entities when Flipping Houses

Legal Entities when Flipping Houses

Wadsworth, OH · Member since 2021 · 110 posts · 91 votes

Hey guys, I have a question that I would appreciate your advice on. So as somebody that is just beginning to get into house flipping, I’m wondering how (and if) I should set up a legal entity. Some people say not to worry about it at first, while others say that you absolutely have to before you start flipping for liability reasons! I understand that there are pros and cons to both, but I’m wondering what I should do in my situation, so I’ll give you a few details:
I’m hoping to get into house flipping full time in the next six months or so… I’m planning on going all in. 
I am probably planning on paying cash, at least at first, until I start getting multiple projects going at once and will need to finance. 
I tend to be the sort of guy that likes to do things the more safe, legal, and systematic way. 

If you think I should form a legal entity before getting more into this, what type would you recommend?

It seems like most people I've talked to recommend a type C corporation that owns individual LLC's for each flip.

I would really appreciate any advice you can give, thanks!

- Ezra



1Reply
46 views

Most Popular Reply

Real Estate Agent · Grand Junction, CO · Member since 2015 · 1k+ posts · 736 votes
4y

@Ezra Henderson set up as an S-Corp - with flipping there is no need to form a separate LLC for each property. Be sure to add your flip houses to your umbrella policy (don't have one? get one!) and also carry builder's risk insurance on each flip until it sells.

See this reply in the discussion

3 Replies

Jump to latestLatest
  • Real Estate Broker · Omaha, NE · Member since 2020 · 329 posts · 203 votes
    4y

    I would recommend setting up an LLC for your flipping business to separate your personal assets from any kind of liability that could pop up. Also, if you will be using hard money you will need to have an LLC set up as lenders cannot lend hard money to your personal name. I don't think setting it up as a C corp is necessary unless you plan on holding some of the properties. Research "series LLCs".

  • Real Estate Agent · Grand Junction, CO · Member since 2015 · 1k+ posts · 736 votes
    4y

    @Ezra Henderson set up as an S-Corp - with flipping there is no need to form a separate LLC for each property. Be sure to add your flip houses to your umbrella policy (don't have one? get one!) and also carry builder's risk insurance on each flip until it sells.

  • Investor · Los Angeles, CA · Member since 2016 · 256 posts · 111 votes
    4y
    Hi Ezra,

    You're going all in and taking this as a business correct? So than of course you would set this up like a business. HML will only lend to entities. Do you NEED a LLC, no. You can buy a house in cash, in you're name, fix it up, and sell it, collect the cash in your name but that's not really what a businessman would do right? Do what a businessman would do and set it up correctly from the start so you don't have to go back and re-do stuff later.

    hope this helps.
Join the conversationCreate a free account to reply, vote on answers and follow this thread.